Company Report

Viettel Global is the first of its kind in the Vietnam stock market. It largely relies on its parent group (Viettel Group) and its sibling companies (Viettel Telecom) to leverage their expertise and resources in order to invest in global markets. At the current moment, profitability has been a bumpy ride due to forex losses and high capex incurred in new markets. It might take a while before the company can erase its retained losses and to start paying dividends to its shareholders. Political and regulatory changes in these markets are also very hard to predict. 

The company recorded VND 1.318 tn in net sales (-11.3% YoY), but ramped up to VND 1.848 tn in terms of net income (+26.8% YoY) in Q3. Such a strong result was contributed by great earnings for the company’s joint ventures. For Q3, JV-sourced income for the company amounted to VND 1.799 tn (+28.5% YoY), in which contribution from HVN might total as high as VND 1.559 tn (~ 86.7% of total JV-related income). Meanwhile, TMV and FVL might only make up 10.8% and 2.56% of total income from JVs. Given our forecasts on its 3 JVs, we apply SOTP methodology to value the company, and the average regional PER at current is lower than that of the previous report. Hence, we applied a lower PER targets in this report. As a result, our SOTP-based 12-month target price is VND 43,700, equivalent to a 2019 PER of 8.0x. Given a 17.2% upside, we provide our rating of OUTPERFORM for the stock. VEA expects that the divestment by the Government will be implemented in 2019 to lower state ownership to 51% from 88.47%, while the HOSE listing will be slower than investor expectations, as VEA needs to wait for its audited 2018 financial statement.

At VND 23,100 per share, CTG is trading at 2018 and 2019 PBRs of 1.3x and 1.2x respectively, which is lower than the industry 2019 PBR average of 1.5x. The lower than average valuation is reflected upon possible 2018 losses the bank may have to absorb. We expect Vietinbank will have to deal with additional NPLs in 2019, while credit growth is expected to be capped due to the inherent difficulty in raising Tier 1 capital. Taking into consideration all of the facts at hand, we recommend a stance of Underperform for the stock, with a 1Y target price of VND 23,000 per share, equivalent to a 2019 PBR of 1.2x.