1H2020 corporate bond issuance results and 2H2020 outlook

We believe that the demand for corporate bonds issuance will continue to remain high in 2H2020 as banks are concerned about the bad debt situation in the current environment. However, the value of issuance in 2H2020 will decrease compared to 1H2020 due to Decree 81, which has just been issued and will take effect from September 1. The main highlight from this new Decree is that the following issuance must be six months after the previous issuance. During the past two years, many companies have split the issuance to make it easier for investors and comply with the regulations for private issuance bond of less than 100 investors. Hence, now companies will be forced to issue a large volume. It will be difficult for issuers to find “bigger” investors. Thus, we will not be surprised if the issuance volume increases sharply from now until the Decree takes effect.

Real estate market update

Q2 2020:

With nationwide social isolation in April and the negative impacts of COVID-19, the performance of the real estate industry in Q2 has been disappointing. Supply mainly came from existing projects, not from new ones.

Ho Chi Minh: New supply launched in Q2 was the lowest for the recent five years. Besides, the absorption rate reached 70%, a decrease of 10-15 ppts QoQ and 20 ppts YoY. The demand has diminished during this period, due to high selling prices and the impact of COVID-19 in Q2 2020. Specifically, total units sold in Q2 2020 were 1,581, which saw a decrease of 58% QoQ and 66% YoY. For the whole H1 2020, the total accumulative sold units was 5,338, a decrease by 49% YoY. Additionally, the average selling price in the primary market remained relative compared to the previous quarter, and up by 4% YoY.

VIB – Update on AGM and proforma 1H2020 performance

So far VIB seems to be the bank with a top earnings growth target (at +10% YoY in 2020) and credit growth target (+24% YoY) amongst the industry players, which can be understandable considering its robust growth momentum during the last three years. 1H results are likely to be fine with 36% YoY earnings growth and 55% guidance fulfillment as per management, which is well better than peers. Management emphasized the bank’s ability to expand credit strongly and maintain asset quality despite the impact of Covid-19, supported by its leading banca position and efficiency improvement. Should there is no serious evolvement of the epidemic,  we forecast that  VIB can maintain its stronger-than-peers growth outlook in 2020/2021. The transfer to HSX, expected by end-2020, is also a catalyst for VIB.

The stock is currently trading at VND18.400, equivalent to an attractive PB 2020E of 1.0x considering its high possibility to maintain an ROE of 25% in the next five years.

Surging Exports to North America and the EU

Vietnam’s international trade keeps improving. We highlights two positive changes extracted from the preliminary trade data by Customs. Firstly, Vietnam’s trade surplus recorded another high of USD 5.5 Bn in 1H 2020. Secondly, exports to key markets such as the US and EU sharply rebounded across many sectors while exports to China keep rising impressively. Although new export orders haven’t come back, surging inventories caused by social-distancing in Q2 2020 pushed Vietnam’s trade surplus up significantly. There are chances that the 2020 trade surplus will surpass 2019’s and mark a new all-time high.

PVS - 2020 is the highlight for M&C bookings but will be less so in 2021

Despite being the upstream leader, less M&C projects in 2021 will prevent PVS from growing. Besides, although cash per share is higher than the market price, the cash dividend policy will be stable with VND700 – VND1,000 per share. As a result, we do not see any significant catalysts for the share price in the future and recommend to ACCUMULATE with a target price of VND13,800. Plus VND1,000 cash dividend, the total expected return is 19.6%, compared to the closing price in July 13, 2020.

Forecast for the automobile industry in 2H2020

We believe that automobile sales will recover in 2H2020 compared to 1H2020, thanks to improving economic conditions and supportive policies from the Government. Although GPM is likely to decline, gross profit will still grow thanks to increased sales. In addition, selling expenses will be lower, which should help PBT in 2H2020 compared to 1H2020.

NT2 update – Lower gas prices will impact profitability

2020 potential: The efficient machine is already maxed out

NT2’s performance has been stable for several years now in terms of output, revenue and NPAT. Consequently, looking from an investor’s perspective, the dividend payout will be maintained at VND 2,500 per share for 2019, equivalent to a yield of 11% at today’s closing price. Accordingly, the 2020 performance is expected to be stable compared to 2019. NT2 is considered by the market to be a good stock not due to its growth potential but because of its proven efficiency and remarkable stability.

PNJ – May’s result update

We maintain our cautious view on PNJ for 2020 as (1) pent-up demand dried up following an impressive recovery in May and (2) we expect consumer spending on jewelry to deteriorate in 2H2020 due to the prolonged impact of Covid-19.

Despite this glooming short-term outlook, PNJ is heavily investing in digital transformation projects, human resources, production capability as well as store networks so as to prepare for the fuller recovery of the demand and to cement its core competitive advantages, while others retailers seem to be barely active. As we expect that those advantages will further solidify PNJ’s undisputed leading position in the jewelry industry which is substantially potential going forward owing to Vietnam’s fast-rising middle class, we are bullish on PNJ;s prospects from 2021 onwards.

For FY2020, we project revenue and NPAT-MI to reach VND 15,470 (-9% YoY) and VND 896 bn (-25% YoY), respectively. For FY2021, we project revenue and NPAT-MI to reach VND 18,547 (+20% YoY) and VND 1,115 bn (+24% YoY), respectively.

PNJ is currently trading at VND 59,000. We reiterate our Buy recommendation with a target price of VND 73,000 (total upside is 23%) , implying a 2020 PER of 19x and a 2021 PER of 15x

HPG update: Waiting for stronger growth

Although the steel industry was hit by the COVID-19, HPG’s net income in 6M2020 increased by 30% YoY and was equivalent to 55.6% of the annual net income target. For the remaining of the year, we believe HPG will meet and even exceed its annual targets to reach our net income forecast of roughly VND 11,000 billion. Firstly, we expect that steel demand will be supported by the recovery after COVID-19 and the strong public investment from late-2020. Secondly, HPG has strong competitive advantages in the steel segment as the company still increased its market share in tough market conditions. Meanwhile, one of its main competitors left the rebar segment and other large manufacturers’ selling volume decreased significantly. Finally, hog prices are still high, and even higher than our expectations due to the low recovery of production volume.

Currently, HPG is trading at VND 27,600, which is higher than our target price of VND 27,300. We will update the valuation in the next steel industry report.

VSH – Operating Thuong Kon Tum, finally!

VSH’s 2019 performance was not good due to the poor hydrology conditions. The problem continued throughout 1Q and 2Q2020 as both Vinh Son and Song Hinh HPP saw output decreasing by 50% YoY. VSH’s output was merely enough for Qc and it only sold 5% of its output on the CGM. VSH expects 3Q2020 to continue to be lower YoY in terms of Vinh Son and Song Hinh HPP’ performance. Thuong Kon Tum HPP is scheduled to start operation in late-August and contribute significantly to VSH’s output but not net income.

DIG update: The Gateway project to drive its earnings in 2020

DIG is a real estate company that owns a large and valuable land bank, focusing mainly in tier-2 cities like Vung Tau, Dong Nai and Vinh Phuc. The company's current valuation is looking quite attractive, with a current P/B of only 0.9 times. However, the short-term growth drivers are not really clear, as delays slow down the implementation of key projects in Dong Nai province. The company has set a profit target VND 520 billion for 2020, resulting in a forward 2020 P/E of 7.2 times. Our current valuation for DIG is VND 17,700/share, equivalent to a 44% return. We will update the valuation based on the latest updates in the next quarter.