Company Report

We maintain our Market Perform for the shares with a revised 1-year target price of VND 20,000/share, which is predicated on an equally-weighted target 2023F PE and EV/EBITDA of 11x and 6.5x respectively. We use higher target multiples as we believe that the company has already passed the worst period in 2H22. However, the shares may already be reflecting an earnings recovery for 2023 and could face short-term profit-taking pressure given the weak projected earnings during the first half of the year.

STK posted a disappointing 4Q22 result, as net sales and profit reached VND 430 bn (-14% YoY) and VND 42.9 bn (-43% YoY), respectively. Q4 results were well below our expectation. Sales remained weak (especially for virgin yarn), given poor consumer sentiment and with retailer inventory overload. GPM fell sharply to 14.9% during 4Q22 (4Q21: 15.1%; 3Q22: 17.6%). Going forward, management expects average chip costs to  decline from  2Q23 with a sales volume recovery taking place from 3Q23 when the inventory build dissipaters. During 2023, we expect the company to post net sales and profit growth of 2.5% and 6.6% YoY, respectively. For 2024, we expect net sales and profit growth of +11.3% and +13.6% YoY, respectively, assuming an overall market recovery and expanded capex by the Unitex factory. Our target price for the shares of STK is VND 28,600/share (-1.4% downside), and we rate the name as UNDERPERFORM.

VNG Corporation (UPCOM: VNZ) was established in 2004 by founder Le Hong Minh. VNG Corporation has been a large player in game publishing and developing for 18 years. VNG Corp. has also tapped into the cloud/data center segment during the 2006-2007 period and the Zalo social networking platform during 2012. The ZaloPay e-payment platform was created during 2016. VNG Corporation has been listed on UPCOM since Jan 5, 2023. Positive single digit growth is expected for the gaming sector. Revenue growth for gaming could be improved due to the higher quality gaming experience, content, graphics, and design. It’s noted that high revenue growth from Vietnam game sales during 2011-2022 was led by mobile game on back of booming internet/3G,4G/smartphone penetration. Notably game sales growth peaked in 2020-2021 due to covid. However, the internet/3G,4G/smartphone penetration is now quite high and set to limited expansion and the expectation of any big change could be less likely under our concerns. We thus think that Vietnam game sector’s sales growth could be softened to single digit rate.

Preliminary 2022 results of ACV: 99 million passenger throughput, consolidated revenue of VND 15.3 trillion (+225% YoY) and pretax profit of VND 7.5 trillion (equivalent to 74% of 2019 level). The results were supported by strong pent-up demand for domestic travel, forex gain from JPY-denominated debt, and landing area consolidation into the P&L. 2023 plan: 116 million passengers (on par with 2019 level), consolidated revenue of VND 18.4 trillion (on par with 2019 level) and pretax profit of VND 8.5 trillion (17% lower than 2019 level). Upgrade to OUTPERFORM, with 1-year target price of VND 98,000/share based on 2024F EV/EBITDA target of 18x (from 18x 2023F EV/EBITDA). China’s early reopening and strong earnings growth outlook in 2023-2024F are the key reasons for our call.

GMD announced the full divestment of the Nam Hai Dinh Vu port, which we view as positive for the shares of GMD, given the significant one-off profit for 2023 and the potential more rapid ramp-up of the Nam Dinh Vu Phase 2 project. Despite a weak outlook for the seaport sector in 2023, GMD could find a way to maintain volume growth, restructure its business in the highly competitive Haiphong port cluster area by giving more focus to Nam Dinh Vu port, and use the sale proceeds for new project investment to reduce its financial burden in the midst of a high interest rate environment. We estimate that 2023 PBT will increase 85% YoY to VND 2.4 tn under our base case. We rate the shares of GMD a BUY, and increase our 1Y-TP of VND 57,400/share (from VND 45,200/share), implying 26% upside.

We upgraded STB to a BUY rating, with our new 1Y TP of VND 29,500 share (+25% upside). Our upgrade reflects enhancement in asset quality via legacy accruals having been fully booked (bringing on NIM to double in 3Q22 to 4.43%), as well as aggressive purge of bad debt and legacy assets. Accordingly, the NPL ratio dropped significantly by 37 bps to 0.9% in 3Q22, as the lowest point after the M&A event. Not to mention, one of the key differences between STB and other commercial banks is that STB had zero exposure to corporate bonds as of Q3 2022, and low loan exposure to real estate developers (2.1% of gross loans).

DRC posted strong 3Q22 results, with earnings surging by 128% YoY as the company benefited from higher sticker prices and sales volume for radial tires. Nevertheless, we see weakness in the bias tire export market and possible higher competition for radial tires from Chinese tire makers once their lockdown measures are being lifted, which induces us to cut 2022-2023 net income by -6% and -26% to VND 310 bn (+7% YoY) and VND 280 bn (-10% YoY), with 4Q22 net income to decline by -4% YoY. With lower 2023 financials and target P/E (from 12x to 11x, vs 3-year average of 12.9x and 5-year average of 15.5x), we lower our target price to VND 23,300 per share. We downgrade DRC to MARKET PERFORM rating.

We reiterate our rating Market Perform with 1Y TP price for TPB shares of VND 22,800 by applying a discount target P/B to 1.x from 1.8x to reflects our concern about the high exposure to corporate bond. Coupled with the potential for NIM contraction and higher NPLs, headwinds are likely for TPB over the near-term. 3Q22 witnessed humble operating income growth of 2.5% YoY to nearly VND 3.8 tn, due primarily to the absence of trading gains as bond interest rate hiked. For 4Q22, we estimate that TPB will achieve PBT of VND 2.1 tn (+26.2% YoY), resulting in 32.5% YoY growth (VND 8 tn) for FY 2022.

Viglacera (VGC) is one of the leading enterprises in building materials (glass, tile, and sanitary ware), and a developer of 11 industrial parks with 879 ha remaining to let in northern and central Vietnam. Tenants include Samsung, Accor, amongst others. We expect that VGC, over the long-term, will be able to maintain a stable income from existing industrial parks. VGC trades at a 2022 and 2023 P/E of 11.1x and 15.3x, respectively. Our target price on the shares of VGC is VND 45,500 (6% upside), and we rate the name as MARKET PERFORM.

For November 2022, VHC posted net sales of VND 893 bn (-10% YoY and -12% MoM), continuing a decelerating revenue trend from April 2022. However, this is the first month during 2022 where the company recorded a contraction in terms of sales in YoY terms. For 2022, we expect net sales and net profit of VND 13.8 tn (+53% YoY) and VND 2.2 tn (+101% YoY), respectively. This translates to 4Q22 NPAT decline of -10% YoY. For 2023, we expect net sales and net profit to reach VND 12.6 tn (-9% YoY) and VND 1.6 tn (-26% YoY), respectively. At VND 71,000/share, VHC trades at a 2022 and 2023 P/E of 5.8x and 7.9x, respectively. We lowered our target P/E for Sa Giang and the Collagen & gelatin segments from 11x to 10x and applied to the 2023 EPS to arrive at an updated 1Y TP of VND 69,200 (-3% downside). As such, we maintain our MARKET PERFORM rating, for the shares of VHC.

In 3Q22, ANV reported net sales and NPAT of VND 1.2 tn (+89% YoY, -4% QoQ) and VND 120 bn (-50% QoQ), respectively. Due to the COVID-19, 3Q21 set a low base effect (a net loss of -VND 13 bn). Despite having recorded strong growth off the low base, ANV recorded its lowest quarterly net profit in absolute terms year to date. Weaker-than-expected earnings owing to lower pangasius prices. The average sales price for ANV dropped to USD 2.5 USD/kg (+40% YoY, -11% QoQ). Thus, the gross profit margin dropped from 35% in 2Q22 to 23% in 3Q22. Through 9M22, ANV posted net sales and PBT of VND 3.8 tn (+54% YoY) and VND 647 bn (+708% YoY), fulfilling 72% and 65% of its sales and PBT guidance for the year, respectively. In 2022, we expect ANV net sales and net profit will reach VND 5 tn (+42% YoY) and VND 694 bn (+439% YoY), respectively. We cut our 2022 earnings forecast 20% due to lower 8% pangasius prices forecast for 2022. For 2023, we expect net sales and NPAT to reach VND 5.1 tn (+3% YoY) and VND 534 bn (-23% YoY), respectively. At VND 26,000/share, ANV trades at a 2022 and 2023F P/E of 4.8x and 6.2x, respectively. Our target price for the shares of ANV arrives at VND 25,100/share (-3% upside). We remain Market Perform on the shares of ANV.

In 9M 2022, PVS posted consolidated revenue of VND 11 tn, +14.8% YoY and NPATMI of VND 415 bn, -19.8% YoY. The key culprit for the fall in gross margin is from lower margin of EPC/EPCI segment, as its margin contracted signifcantly from 3.7% in 9M 2021 to 0.4% this year. The O&M segment also saw a significant margin cut, to nearly the breakeven point. Significantly higher material and input costs (65%) is the main reason so far. Recently, Vietnam National Assembly has passed the Revised Oil & Gas Law, which is supposed to create a clearer legal framework for oil & gas activities, including new investments in E&P projects. As the outlook for Vietnam oil & gas E&P sector can be improved marginally in 2023 and more positively from 2024, we expect PVS to continue to rely on the international market for large EPC contracts in 2023.

3Q22 PBT arrived at VND 313 bn, an increase of 179%. However, through 9M22, PBT dropped 79% to VND 614 bn due to heavy losses within the petroleum segment amid supply chain disruption and volatile oil prices. Accordingly, PLX lowered its PBT target -90%, from VND 3.1 tn to VND 300 bn at the most recent EGM. PLX targets its PBT to recover strongly to VND 3.2 tn in 2023, and increase gradually to VND 3.5 tn by 2025 due to market stabilization. The government expects to maintain its 75.87% stake in PLX through 2025. PLX, however, expects to divest its 40% stake in PGB during the first half of 2023, and fully divest from Petrolimex Construction & Trading Corporation.

The container shipping market (including the spot market, charter market, and second-hand market) had considerably shrunk during 2022. Though the downcycle might continue into 2023 and even 2024 due to increasing supply, we think that further downside risks are limited in scope, especially in the case of the charter market. The potential reopening of the Chinese economy could act as a key supporting factor for shipping demand in 2H 2023 and could reinflate the sector, a time when inventory destocking might reach completion by 1H 2023, of which we could see a promising reflation in output as well. In our view, the HAH stock price has reflected the worst case scenario, as 2022 P/E is only at a shockingly low 2.8x at current price. We thus expect a re-rating for the stock in 2023, when shipping demand starts to recover. Given our expectation that 2024 will be the worst year for HAH earnings, we use our fine-tuned estimated 2024 EPS of VND 8,558 and a P/E ratio of 5x (historical average P/E in the last cycle under normal conditions) to derive a new target price of VND 42,800/share, implying a 30% upside. We upgrade our rating to BUY.