Company Report

QNS has released its 4Q 2019 report, in which it claims to have achieved a net sales of VND 1.63 tn (-13.4% YoY) and PAT of VND 472 bn (+4.5% YoY). Cumulatively, 2019 net sales and PAT have reached VND 7.68 tn (-4.4% YoY) and VND 1.28 tn (+3.2% YoY) respectively. While net sales only achieved 93% of our estimate due to a lower-than-expected sugar price, after-tax profit beat our estimate by +1.6% from financial and other miscellaneous income. For 2020, we expect QNS to reach a net sales position of VND 7.46 tn (-2.9% YoY) and PAT of VND 1.23 tn (-4.0% YoY) on the assumptions that soymilk sales growth would continue at a 10% level. However, overall performance is likely to be dragged down by sugar sales, which may experience a sharp contraction of -41% YoY. QNS shares are now trading at the price of VND 25,500 per share, equivalent to 2020F P/E and P/B ratios of 6.4x and 1.07x, still attractive in our view given the high proportion of soymilk that comprise total sales. Therefore, the drop in sugar sales shouldn’t dent company performance results too much. Given the stable soymilk business of QNS, we opt to maintain our target P/E ratio of 9.0x for 2020 together with a discount of -15% on the target price to reflect the market’s disfavor for the share as explained below. When calculated in this way, we arrive at a 1Y target price of VND 30,500 per share (+19.6% upside), equivalent to an OUTPERFORM rating. 

PVD released its 2019 earnings results, in which net revenue, gross profit, and NPATMI recorded VND 4.369 tn (-20.6% YoY), VND 449 bn (+13.1% YoY), and VND 189 bn (-3.9% YoY) respectively. PVD exceeded its revenue target by 14%, and recorded a profit that far exceeds the net-neutral target it set for 2019. For 2020, we estimate PVD net revenue and NPATMI can achieve VND 5.237 tn (+19.9% YoY) and VND 236 bn (+24.7% YoY) respectively. At a price of VND 12,100 per share, PVD is trading at 2020 and 2021 P/E ratio of 21.6x and 16.3x respectively. P/E ratio will have positive improvement thanks to the growth of earnings. Its 2020 P/B ratio is at 0.36x, which is lower than the 3-years historical P/B and regional peer P/B of 0.50x. We set our target 2020 P/B to be 0.45x, thus arriving at the target price of VND 15,000 per share (23.9% upside). We accordingly have a BUY rating for the stock for the time being. 

For 2020, we forecast the bank’s total assets, credit, and customer deposits to grow by 17.2%, 17.3% and 17.7% respectively. In 2020, Vinhomes plans to launch 3 new projects with 1,100 low-rise units in Vinhomes Wonder Park (~133 ha, Hanoi), ~2,000 high-rise units in Vinhomes Galaxy (~11 ha, Hanoi) and ~800 low-rise units in Vinhomes Dream City (Hung Yen) to be offered on an initial basis. It is expected to generate a greater presales value of ~VND 110 trillion (vs. VND 91.1 trillion in 2019). Together with the Grand Park project in HCMC which was launched in June 2019, we estimate demand for mortgages to range from VND 80 tn to VND 120 tn 2020-2021. Techcombank thus possesses ample room for mortgage loan expansion. At the current price of VND 22,500/share, TCB is trading at 2020E P/B and P/E of 1.08x and 7.02x respectively, lower than the sector average of 1.36x and 8.43x respectively. We like the bank’s business model, which has focused on retail products for affluent clients, and possesses core competencies in banking for the housing, FMCG, and auto industries, etc. TCB is also the dominant player in corporate bonds, with more than 80% of bond distribution market shares residing on the HOSE. We maintain the targeted P/B ratio for the stock at 1.3x, which yields the 1Y targeted price of VND 27,100 per share. This is equivalent to an upside of +20.4% from the current price. Therefore, we maintain our OUTPERFORM rating on TCB. 

NKG revenue in 2019 ended the year with VND 12.177 tn, with a razor thin margin of just 47 bn in profit. These figures dropped further by -17.8% YoY and -17.5% YoY respectively due to the difficulty in the export market and margin contraction resulting from pressure to reduce inventory in the first quarter of the year. However, the company’s business results have indicated some recovery signals on the horizon in terms of a fattened export and margin boost in the second half of the year.

At the current price, NKG is trading at PE and EV/EBITDA 2020 of 9.1x and 4.3x respectively. Our rating for the stock is Market Perform, with a 1-year target price of VND 9,100/share based on a target P/E and EV/EBITDA of 8x and 5x respectively. Although the stock valuation looks attractive in term of EV/EBITDA, the PE ratio is still not quite cheap in our view. Our net margin assumption of 1.3% for 2020 is higher than the level of 0.4% in 2018 and 2019, but still well below the 5-year historical average of 2.9%. We will closely watch the performance of the company, and update our rating when appropriate.

In 2019, net sales totaled VND 5.842 tn (+14.9% YoY), fulfilling 97% of guidance while NPAT posted VND 375 bn (-23.7% YoY), only fulfilling 88% of guidance. Overall, the significant drop of net earnings was mostly due to lack of property projects in 2019, while the 2018 real estate sector was backed by My Dinh Plaza 2 and My Dinh 1.  We estimate the top and bottom line to both be brighter at VND 6.746 tn (+15.5% YoY) & VND 457 bn (+22.0% YoY), compared to company guidance of VND 7.222 tn and VND 501 bn. PC1 is trading at FY20 P/E of 5.3x and a compelling PEG ratio of 0.3x (given 2020-2021 EPS growth at 19.7%). We see some earnings drivers in 2020, including (1) recognition of Thanh Xuan real estate project in 2Q 2020 and Vinh Hung in 2021; (2) new online production from 3 hydropower plants (Mong An, Bao Lac B & Song Nhiem 4). But our projection hasn’t been factored in the other two new wind power projects recently disclosed on 12 Feb 2020 (as discussed above), and we will provide detailed a recommendation in coming research reports. 

For FY2019, DRC delivered VND 3.858 tn in net sales (+8.6% YoY) and VND 313 bn in pretax profit (+76% YoY), having accomplishing 94% and 199% of the 2019 targets respectively. The gross profit margin expanded from 12.1% in 2018 to 14.8% in 2019. This was mainly due to the downtrend in raw material prices, such as synthetic rubber, chemicals, and black coal, while the natural rubber price remained flat. Also, a higher utilization rate from the radial factory helped improve GPM.  At the current price of VND 22,800 per share, DRC is being traded at a 2020 P/E of 10.2x and EV/EBITDA of 4.4x, which is lower than the peer average P/E of 11.3x and EV/EBITDA of 5.8x. Strong bottom line growth (78% YoY) in 2019 is to be followed by an expected moderate growth of 15% YoY in 2020, which has made DRC valuation much more reasonable than in the past (19x in 2017 and 20x in 2018).  However, a key risk to our call is the trend to switch from bias to radial tires, which may intensify compared with our base case decrease of -5% in bias sales volume. We therefore apply a discount of 15% on P/E and EV/EBITDA peer average of and 11.3x and 5.8x respectively to calculate target multiples. With a target P/E and EV/EBITDA of 9.5x and 5x on average 2020 financials, we derive our 2020 year end target price at VND 23,900, equivalent to a MARKET PERFORM rating. 

MWG held an analyst meeting on 21 February 2020. January 2020 performance: net sales and net income were VND 12.56 tn (+21% YoY) and VND 553 bn (+22%YoY), accomplishing 10% and 11% of the 2020 target, respectively. The company focused more on sales in preparation for Tet-holiday rather than store openings. As a result, all three chain outlets witnessed an increase in daily revenue per store, despite lower working days. 2020 company guidance: despite the concern over consumption of discretionary products amid the coronavirus outbreak, management still kept its 2020 target unchanged, with a net sales and net income at VND 122.445 tn (+20% YoY) and VND 4.835 tn (+26% YoY), respectively. Other discussions were focused on the impact of coronavirus outbreak, competition with e-commerce players, mobile phone industry growth prospects on 5G launch and discontinuing of 2G, and 2022 market share target for mobile phone (55%) and consumer electronics (50%). At the current price of VND 106,200 per share, MWG is trading at a 2020F P/E of 9.8x. We maintain our BUY recommendation, with an unchanged target price of VND 192,800 per share, implying 81% upside potential from current levels. We continue to use the SOTP valuation method to derive the target price, with a target P/E of 14x for the ICT segment (down from 16x due to the shrinking of mobile phone industry growth) and a target P/S of 0.53x (unchanged) on 2020E financials (rolled over from average 2019-20E). Key downside risks: possible negative growth in mobile industry, affecting MWG’s mobile phone segment and fierce competition in the e-commerce segment

MBB has recently released its 4Q 2019 earning results, featuring total operating income and pretax profit of VND 6.7 tn and VND 2.4 tn. This was a welcome rise upwards by +17.1% YoY and +38.1% YoY respectively. For full year 2019, pretax profit reached VND 10.036 tn (+29.2% YoY), surpassing the goal of the annual plan, at 106%. While great performance, this was -2% below our forecast, as actual provision expenses for 2019 escalated to VND 4.89 tn (vs. our forecast of VND 4.25 tn). For 2020, we expect MBB to post a respective VND 28.5 tn and VND 12.1 tn in total operating income and pretax profit, which is equivalent to a growth rate of +15.7% YoY and +20.6 % YoY. As the result of the capital raise to the present date has been lower than initially planned, we made an adjustment to the total equity of the bank. We therefore account for only the sales of 21.43 mn treasury shares and the new isssuance of 64.3 mn shares (instead of 47 million treasury shares and 141 mn new shares). Through this adjustment, the BVPS of MBB nudged to VND 19,641 (-2% compared to our previous estimate), and the target price for MBB was slightly adjusted to VND 29,460, which is still +43.7% higher than the current market price. We therefore maintain our BUY recommendation for MBB stock.  

VHC released its Q4 earnings results, in which net sales and PAT reached VND 2.171 tn (-19.7% YoY, yet +15.3% QoQ) and VND 199 bn (-50.9% YoY and -21.5% QoQ). Cumulatively, net sales and PAT of 2019 reached VND 7.867 tn (-15.1% YoY) and VND 1.180 tn (-18.2% YoY), having achieved 78% and 94% of the Company’s annual targets and slightly below our estimate of VND 1.254 tn for PAT. For 2020, we expect net sales and net profit to achieve VND 8.476 tn (7.7% YoY) and VND 831.9 bn (-29.5% YoY). In our assumption, ASP will pick up gradually towards year-end on warming demand, and 2020 ASP may stand at $3.30 USD per kg (-18.1% YoY). Total export volume of fish fillet may recover by 25%, as demand in the US may resume itself to normal levels. Sales of collagen & gelatin may surge by 40%, owing to an increase in designed capacity, from 2,000 tons to 3,500 tons in 2H 2020. Despite the company's efforts towards improving productivity, a stable price at the current low levels may still translate into a lower profit margin nonetheless. VHC shares are now trading at a price of VND 31,450 per share, which is equivalent to a 2020F P/E forward ratio of 7.0x – quite fair in our view. We maintain our target P/E ratio for VHC at 7.5x, thus arriving at the target price of VND 33,550 per share (+6.7% upside). We consequently maintain our rating Market perform for the share.

AAA net profit in 4Q 2019 posted VND 64 bn, attaining significant growth of 19.4%YoY thanks to a sales volume growth of 3% in plastic bags, an increase in interest income, and a reduction in sales-related expenses. Revenue in 4Q 2019 posted VND 1.833 tn, a decrease by -17% YoY. This drop in performance was mainly due to a -25% YoY contraction in trading, and the decrease in the plastic bag price by -14% YoY, tracing the slide in the global oil price. Cumulatively, revenue in 2019 increased by 15.3% YoY to VND 9.24 trillion, while net income surged by 136.5% YoY to VND 502 bn, accomplishing 98% of the company’s guidance. At the current price, AAA is trading at a 2020 P/E forward of 4.7x, which is quite attractive in our view compared to the 3-year historical average of and the regional peer equivalent of 8x. We maintain our Outperform rating for the stock, with a target price of VND 18,000/share based on the SoTP method. In the next 3-6 months, we think that encouraging growth, along with a cash dividend yield of 8-12%, can be supportive catalysts for the stock price going forward. 

NLG has announced its 2019 financial results, in which it achieved its bottom line target for the year. Net revenue only achieved VND 2.5 tn (-27% YoY), mainly attributed to the fact that the unit handovers for Mizuki Park were not consolidated to NLG financial results. Additionally, project transfer delays for Nguyen Son, Hoang Nam, and Waterpoint were longer than expected due to a prolonged legal approval process. Meanwhile, net income reached VND 960 bn (+24% YoY) via profit from associates and JVs, further aided by an additional bonus of a one-off accounting goodwill income event from the Paragon Dai Phuoc project. These factors culminated in a result of fulfilling 100% of the 2019 annual target. For 2020, we expect 10%-15% growth in terms of net profit, backed by the delivery and stake sale in ongoing projects such as Southgate (Waterpoint phase 1), Akari City, and Mizuki Park. At the current price of VND 24,950/share, NLG is trading at a 2020F P/E and P/B of 5.7x and 1x respectively.  Our fair value estimated by RNAV methodology is VND 37,800/share. As such, we reiterate our BUY recommendation for NLG, with a 1Y target price of VND 37,800 (+51.5% upside).

PetroVietnam Gas (GAS) for Q4 2019 delivered VND 17.32 tn in net revenue (-8.9% YoY) and VND 3.1 tn in NPAT (-5.2% YoY). While both dry gas and LPG volumes remained flat YoY, a dive in both the top line and bottom line YoY were attributed to a -38% YoY lower fuel oil (FO) price and a -21% YoY liquified petroleum gas (LPG; e.g. propane) price. For 2019 on a consolidated basis, GAS achieved VND 75.35 tn in net revenue (flat YoY) and VND 12.16 tn in net profit (+3.8% YoY). Dry gas volume growth of 1.6% YoY and LPG volume growth of 16.6% helped compensate for a lower FO price (-13% YoY) and LPG price (-21% YoY). We revise downward our 1-year target price to VND 96,000 (from VND 109,000), based on lower 2020E estimates and target P/E of 17x (unchanged) and target EV/EBITDA of 10x (from 11x) in line with the recent correction of regional peers. As such, our 1Y target price for GAS arrives at VND 96,000/share, a 12.4% upside from the current market price. The share price has dropped 9% YTD, largely reflecting the lower oil price outlook, and thus we reiterate a Market Perform rating.

At the current market price of VND 86,000/share, VHM is trading at 2020 P/E metrics of 12.8x, which is lower than industry peers. We maintained our OUTPERFORM rating for the stock at present. The key downside risks to our rating mainly includes slower-than-expected cash inflow from bulk sales and launches of new projects. Weaker-than-expected residential demand could also occur in the case of a potential GDP slowdown caused by the coronavirus outbreak, particularly were it to persist after Q1. 

BIDV recently released its 2019 financial statements, with 2019 consolidated TOI and PBT of VND48.2tn and VND10.876tn, respectively, which grew by 8.8% YoY and 15.8% YoY, respectively. The results fulfilled 105.6% of management’s annual plan. There was also decent credit expansion towards retail lending: total credit increased by 12.4% YoY (vs. +13.56% YoY of the sector), with individual and SME loans up by 21.5% YoY and 18% YoY, respectively, and corporate bonds (which are counted as credit according to regulations in Vietnam) down by 11.3% YoY in 2019. We revise down our 2020E earnings by 15%, mainly to factor in the negative impact of the coronavirus outbreak and our more prudent assumptions on higher new NPL formation as well as higher-than-expected provision costs for VAMC bonds in the year. For 2020E, we forecast PBT of VND14.01tn, up 28.8% YoY. We estimate ROAA and ROAE at 0.6% and 13.6%, respectively, and our 2020E BVPS is at VND20,088 (before charter-capital increase). In 2020, the bank plans to issue an additional 5% of shares to increase its charter capital (post-money). Although we don’t include the additional capital plan in our model, we include it in our valuation. As we assume an issuance price of VND45,000 per share and with our new target PBR of 2.5x (from 2.0x), we derive a higher 12-month target price of VND53,300 (previously VND42,900). With upside potential of 2.5%, we downgrade our rating on the stock to Market Perform (from Outperform). Downside risk: higher-than-expected NPL formation; upside risk: faster-than-expected divestment of BIDV MetLife Insurance.

As we project the parent bank’s earning result for 2020 to be brighter than our previous forecast given the expectation of higher credit growth and a possibility in NIM expansion, we apply a target P/B ratio of 1.25x (vs. 1.20x in our previous report) in tandem with an expected ROE of 18.5%. For FeCredit, the residual income model and P/B method resulted in a valuation equivalent to a P/B ratio of 1.83x. On a consolidated basis, our target price for VPB stock for 2020 and 2021 are VND 28,900 and VND 33,200. As the stock price has increased significantly since the date of our previous report (+42%) and is now 5.5% below our 2020 target price, we change our recommendation to MARKET PERFORM for VPB stock. The above forecast and valuation has not taken into account any possible impact related to the sale of FeCredit in the foreseeable future. Assuming the sale of FeCredit would be done at P/B ratio from 2 to 4x, the target price of VPB could be at a 1-30% range higher than our current target price.