DPPA mechanism: Basis for generation companies to resume investments in renewable energy
22-07-2024
: REE, GEG
: Utilities
: Thang Hoang
Tags:
- Decree 80/2024/NĐ-CP which allows Direct Power Purchase Agreement (DPPA) between renewable energy generation companies (RE gencos) and buyers was signed and became effective on July 3rd, 2024. We believe DPPA is the necessary regulatory basis to resume investments for transitional RE projects and new RE projects without solely relying on EVN.
- We view DPPA as a pilot for Vietnam Wholesale Electricity Market (VWEM) and an important step in liberalizing Vietnam’s electricity market. Regarding intermediaries, DPPA mechanism will create opprtuinities for industrial parks to participate when their customers have total electricity consumption over 200,000 kWh per month. As for electricity sellers, we believe RE gencos that have transitional projects (GEG) or new projects to be launched (REE) will be the main benificiaries of the mechanism.
PVS – “A rising tide lifts all boats”
19-07-2024
: PVS
: Oil & Gas
: Ngan Le
Tags: PVS
- As mentioned in our previous report, we believe that Vietnam's oil and gas industry is returning to its "golden age" (similar to the 2011-2015 period) thanks to high oil prices being sustained for a sufficiently long period to act as a catalyst for new projects. Unlocking oil and gas projects not only brings substantial value to the M&C backlog, but also has a positive impact on other service segments of PVS. As a result, NPAT-MI grew by 40% YoY in 1Q2024 despite flat revenue compared to the same period last year. For 2Q2024, we estimate PBT at VND 232 bn (-21% YoY).
- 2024 serves as a pivotal year for PVS as the company begins to implement several key projects in the industry, notably Block B, Su Tu Trang, and Lac Da Vang. Typically, in the first year of a project, the company usually makes progress on surveys, designs, and equipment procurement. Therefore, we believe that the disbursement as well as the main tasks will be concentrated in 2025 and 2026.
- CARG 2024 – 2026 of NPAT-MI forecast reaches 8%, while those in consecutive 5 previous years (2019 – 2023) was only 1%. Currently, PVS is trading at a P/E of 22x, higher than the 5-year average of 17x. We believe that this price reflects most of the company’s growth potential from large projects. We have set a target price for PVS at VND 42,400/share based on the FCFF and P/E methods, corresponding to a NEUTRAL recommendation for this stock
SCS –Growth momentum expected to continue into the second half of 2024
18-07-2024
: SCS
: Aviation
: Quan Cao
Tags: SCS
- In Q2-FY24, international and domestic cargo volumes were 53 thousand tons (+61% YoY) and 17 thousand tons (+25% YoY), respectively. Revenue and NPATMI reached VND 264 bn (+53% YoY) and VND 190 bn (+47% YoY), respectively.
- In the accumulated 6M2024 periodd, international and domestic cargo volumes reached 96 thousand tons (+50% YoY) and 33 thousand tons (+24% YoY), respectively. Net revenue and NPATMI came at VND 477 bn (+43% YoY) and VND 337 bn (+39% YoY), respectively, completing 49%/51% of our projections.
- For 2024E, we maintain our projections for SCS's international and domestic cargo volumes at 192 thousand tons (+40% YoY) and 58 thousand tons (+10% YoY), respectively. Revenue and NPATMI are forecast at VND 974 bn (+38% YoY) and VND 659 bn (+32% YoY), respectively. The corresponding EPS is 6,256 VND.
- We set a target price for SCS at VND 97,800/share, which is 2% higher than the previous target price, following the adjustment to the weighted average cost of capital (WACC: 10%). Combined with a cash dividend of 5,000 VND in the next 12 months, the expected total return is 17%. We recommend ACCUMULATE.
KBC – Expect to record a positive net profit in Q2 2024, driven by the resumption of IP land handover
17-07-2024
: KBC
: Industrial Land RE
: Hung Le
Tags:
- In Q2 2024, we estimate KBC's total revenue to reach VND 1,430 billion (USD 57 million; -44% YoY), with the net profit attributable to the parent company's shareholders estimated at VND 473 billion (USD 19 million; -52% YoY). For the full year 2024, revenue and net profit attributable to parent company shareholders are projected to be VND 6,178 billion (USD 245 million) and VND 1,973 billion (USD 78 million), respectively, with the expectation that the Trang Cat transaction could be completed in the first half of 2025 instead. The corresponding EPS is VND 2,570.
- The Trang Cat project has made significant legal progress over the past year, with transaction signals beginning to emerge in Q1 2024. In light of the new legal context, we believe there is sufficient basis to provide a preliminary assessment of the project's prospects. We are maintaining our previous target price of VND 41,800 per share and will update the detailed assumptions in the latest update report. The expected return over the next 12 months is 47%, based on the closing price on July 16, 2024.
Real estate market update – Gradual recovery of supply in tier-I cities
16-07-2024
: KDH, NLG, HDG
: Real Estate
: Thach Lam Do, CFA
Tags: Real Estates
- For the first half of 2024 (1H24), according to CBRE's research department, the recovery trend of the real estate market in tier-I cities (Hanoi, Ho Chi Minh City) continues, however mainly in the apartment segment, and there is a divergence between the two major markets. The Hanoi apartment market shows a clearer recovery, with 12,208 units successfully launched (+185% YoY), contributed by projects of well-known developers (Lumi Hanoi, Sola Park). The Ho Chi Minh City market is relatively quieter, with 1,741 units successfully launched (-31% YoY), contributed by projects such as Privia (KDH) and Eaton Park (Gamuda Land, high-end segment).
- For the second half of 2024, we expect that supply and absorption in tier-I cities will continue to drive the recovery, along with a clearer recovery in the Ho Chi Minh City market and surrounding areas, supported by: 1) more positive buyer sentiment as lending interest rates are expected to remain low and the Government introduces new legal policies to protect buyers and resolve issues for existing real estate projects; 2) Increased supply from developers.
- For the companies on our watchlist, we expect them to focus on launching key projects in the second half of 2024, including: 1/ KDH with the Foresta project (a joint venture with Keppel Land, formed from the Clarita and Emeria projects in Thu Duc City); 2/ NLG with the apartment project at block CC5 – Mizuki Park urban area and low-rise units at Waterpoint urban area; and 3/ HDG with low-rise products in Charm Villas – phase 03.
Update on trade growth in Jun 2024
15-07-2024
: VDS
: Macroeconomics
: Ha My
Tags:
- Imports increase more strongly than exports in 6M2024.
- Improving momentum in the machinery, equipment,and textile groups.
- 2H2024 trade outlook
Is the U.S. Economy on the Verge of Recession?
12-07-2024
: VDS
: Macroeconomics
: Luan Pham
Tags:
- Economic Recession Indicator displaying a cautionary signal.
- History doesn’t always repeat itself.
- Positive signals prompted the Fed to lower interest rates.
The textile industry is expected to grow in the second half of 2024 as orders increase
11-07-2024
: TNG, MSH, TCM
: Textile & Garment
: Hien Le
Tags:
- According to the Vietnam Customs (GDC), in the first six months of 2024, the export value of textiles and garments saw a slight increase compared to the same period last year, reaching USD 16.5 bn (+4.6% YoY). The monthly export value also rebounded in June, reaching USD 3.16 bn (+2% YoY) as a 2% growth in the US market, while other markets remained weak.
- We expect the textile industry to grow in the second half of 2024 due to increased production, as the import value of fabrics in the first six months of 2024 reached $7.2 billion (+12.7% YoY) with an export value of $1.2 billion in June (+15% YoY), and the selling prices of various yarns have increased compared to the same period last year. In addition, according to our July 2024 macro report, the sharp rise in Vietnam’s PMI index to 54.7 points in June 2024 also signals optimistic manufacturing activity in the second half of 2024.
- Gross margin of textile and garment enterprises is unlikely to increase in the second half of 2024 as (1) the minimum wage increasing by 6% from July 2024 and (2) average selling prices are unlikely to increase. Average selling prices are difficult to increase as (1) it is forecast that the currencies of competing countries such as Bangladesh, Indonesia and Mexico will depreciate highly compared to VND and (2) demand in the US is still weak.
- Vietnamese enterprises are gradually shifting to high value-added and complex products as Bangladesh holds a cost advantage in high-volume, low-value products. Sportswear items from TNG, MSH, TCM, HDM, and TVT will face less competition from Bangladesh in the short term
Electricity sector – Brighter outlook for hydropower plants in 2025
10-07-2024
: POW
: Utilities
: Thang Hoang
Tags:
- Total electricity consumption volume to increase in 2024-2025 due to the increase in manufacturing activities and the residential power demand. However, we are yet to be optimistic on business performance of hydropower plants in 2024.
- 2025F outlook for hydropower generation companies to be brighter due to (1) strong volume growth due to a La Nina phase returning in H2 2024, (2) the average electricity selling price for hydropower plants would hardly decline, while that could increase once EVN improve its financial performance.
Vietnamese truck, bus tire producers – Export market is the new pedal in the context of being narrowed its positioning in domestic
09-07-2024
: DRC
: Automobiles
: Hung Nguyen
Tags:
- The influx of Chinese imports of truck, bus replacement (TBR) tires at competitive prices since 2019 poses a threat to the potential expansion of sales volumes in Vietnam for domestic TBR tire producers such as DRC, CSM.
- Hence, these companies switched their care to export market (which is imposing the anti-dumping tax for Chinese products like US or is not noticed by China due to a small market size such as Brazil, Egypt in recent years). We view that Vietnam TBR tire producers will improve its export sales volume in short-term but may encounter limited sales growth in the long run once they reach their peak production capacity
TCB – Outstanding Credit Growth to Drive Q2/24 Profit Growth
08-07-2024
: TCB
: Banking
: Tung Do
Tags:
- For Q2/24, we estimate TCB's consolidated PBT to rise by 24% YoY to VND 7.0 trillion, mainly driven by net interest income with an expected growth of 40% YoY.
- The drivers of TCB’s net interest income growth in Q2/24 include an above-industry-average credit growth (expected at 12.3%) and a significant YoY expansion in NIM (+40 bps YoY) as the "flexible pricing" policy has notably impacted TCB’s interest income in the same period last year.
- We maintain our 2024F PBT projection for TCB at VND 28.0 trillion (+23% YoY), with the growth in Net interest income/net fee income/Total operating income projected at 24%/19%/20%.
- We maintain our BUY recommendation for TCB with a target price of VND 28,000 per share, implying a total expected return of 19%.
DPR – Compensation from Tien Hung 2 drives strong Q2 profit growth
05-07-2024
: DPR
: Industrial Land RE
: Hung Le
Tags:
- According to estimates, the average selling price (ASP) reached VND 43 million per ton (+26% YoY) with a sales volume of approximately 2,800 tons (+4% YoY) in Q2. Combined with compensation from the Tien Hung 2 project, DPR's consolidated revenue is estimated at VND 191 billion (USD 8mn; +31% YoY) and net profit at VND 90 billion (USD 4mn; +212% YoY) in Q2 2024. For the full year 2024, DPR's consolidated revenue is expected to reach VND 1,117 billion (USD 44mn; +7% YoY) and net profit at VND 257 billion (USD 10mn; +24% YoY). Corresponding EPS is VND 2,962.
- After Decision 227/QĐ-TTg, several new details have emerged regarding the conversion of rubber land related to DPR’s area in Binh Phuoc province, including: (1) Although the land allocation target for industrial parks by 2025 for the Bac Dong Phu Ext. and Nam Dong Phu Ext is smaller than the planned area of these two projects, the area acquired and corresponding compensation will still be 100% of the planned area, immediately after the project receives investment policy approval; (2) the compensation price is being negotiated for an increase (potentially up to VND 1.3 billion per hectare); (3) the Suoi Giai Lake Tourism Urban Area and Tay Ho Ba Mu projects are feasible for DPR to receive compensation, in addition to the new urban area in Dong Xoai City.
- Based on the Sum-of-the-Parts (SOTP) method, the target price has been adjusted up to VND 53,300 per share, as we: 1) Adjust the progress of compensation receipt for the two new industrial park projects to an earlier schedule instead of in two phases (50% in the first year and the remaining 50% after 2025 when additional allocation targets are granted); 2) The maintenance cost of the rubber segment is lower than expected. Combined with a 12-month forward cash dividend of VND 1,500 per share, the total expected return is 26.1% based on the closing price on July 5, 2024.
22-07-2024
6 