KSB updates

Opinion: We believe that KSB's earning in 2020 will be slightly affected by the decline from the contribution of Tan Dong Hiep mine due to the inventory from this field and the higher contribution from Dat Cuoc’s industrial park. However, in the long term, from 2021, revenue and profit from Tan Dong Hiep will decrease significantly. Therefore, the long-term prospect of the company will be determined by the possibility of M&A in the same industry. By contrast, debt will put pressure on cash flow in the short term. KSB's current share price is VND 19,150 per share, a 25% decrease compared to the end of 2018. The 12-month trailing PE is 3.6x, around its PE of 2013. We believe that this currently reflects the decline in profits from the Tan Dong Hiep mine, but it does not reflect business expectations in case of a successful M&A deal.

VHC – Update on 2019 results and 2020 forecast

In 2019, export prices have dropped sharply and the weak export to the US market significantly pulled down the company's revenue and profit. VHC recorded net revenue and profit before tax of VND 7,867 billion and VND 1,309 billion respectively, decreasing by 15% YoY and 22% YoY. Adjusted for abnormal revenues and financial expenses from divestments in 2018 and 2019, PBT from core operation in 2019 reached VND 1,203 billion, down 32% YoY.

Summary of LTG's performance in 2019

2019 was a difficult year in all business segments for LTG. As a result, both LTG's revenue and profit recorded a decrease compared to 2018. In 2020, we expect two segments- pesticides and seeds to hardly grow due to a saturated and competitive market. The negative impact from the Coronavirus will also impact earnings this year. Meanwhile, the revenue of the rice segment will decrease compared to 2019 as LTG no longer sells non-branded rice.

Earnings results of listed companies in 2019

According to the results from 651 listed companies in HSX and HNX, revenue and NPAT for 2019 increased by 9% YoY and 12% YoY, respectively. In particular, HSX contributed to 93% of the whole market’s NPAT increase.

HSX’s NPAT in 2019 rose 12% YoY, mainly from the contributions of VHM, CTG, VCB and VIC. The increase in NPAT of these four companies contributed nearly 77% of the HSX NPAT’s increase. The rise in revenue of these four ones only contributed about 34% of the total increment of the HSX

PTB 2019 updates

PTB posted its 2019 results with net sales of VND 5,552 Bn (+18% YoY) and NPAT of VND435 Bn (+13% YoY), which were rather in line with our expectations of VND5,552 Bn for net sales and VND475 Bn for NPAT. As of results, the company fulfiled 95% profit guidance in 2019.

SCS – Update on 2019 results and 2020 forecast

SCS posted its 2019 results with net sales of VND748 Bn (+11% YoY) and NPAT of VND503 Bn (+15% YoY), which were rather in line with our expectations of VND753 Bn for net sales and VND502 Bn for NPAT.

VPB – Updates on 2019 Business Performance

The parent bank acted as growth driver in 2019 with a 38.2% YoY core earnings growth. FE Credit also maintain its recovery with a decent credit expansion (+13.8% YoY), NIM improvement (from 28.4 to 31.3%), CIR improvement (from 32.1 to 31.3%), and reasonable provision expense growth (15% YoY).

FE Credit has just received SBV’s approval to transfer into a joint stock company. This is a step towards its IPO/placement plan, expected to complete within this year, which can act as a driver for stock price in near term.

The stock has performed well with a 40% increase YTD to VND 28,050/share (PB 2020f of 1.2x.), reaching our target price set in Strategy Report 2020. Considering the bank’s potential high growth, we raise VPB’s target price to VND34,000/share, equivalent to a 21% upside compared to the current market price. We thereby recommend to BUY the stock.

Which opportunities for DRC in 2020?

The production of radial tires is on an uptrend. The production scale, price and product quality of FDI tire manufacturers is outperforming domestic tire enterprises. Therefore, exporting is an opportunity for DRC to maintain its growth. The markets which are currently applying additional import duties in order to limit Chinese tires, are DRC’s existing markets such as the US, Brazil and India. In 2020, we believe that DRC will accelerate the negotiation process with European partners in order to take advantage of restricted Chinese goods as well as the reduced import tax when the FTA Vietnam - EU comes into effect. The short-term demand from existing markets such as the US, Brazil and the potential market - EU – will allow DRC to operate at its highest capacity. Thereby, the company can reach its planned revenue and profit.

Policies in the era of nCoV-2019

Economists have recently revised their forecast for Vietnam and other Asian countries economic growth. Estimation are broad but in general have been downgraded. The main points are 1) high ambiguity and 2) sluggish outlook. The most important questions policymakers seem to be interested in are what economic stimulus packages should be put forward under the issue of the Coronavirus epidemic, trade tensions and endless geopolitical conflicts. In this note we highlight some of the ideas put forward by Asian countries and Vietnam.

Steel Production and Consumption in 2019

In 2019, domestic steel consumption grew at the same rate as the construction industry, at roughly 9%. However, there were significant differences in the growth rate of each steel segment. Domestic coated steel grew at 12.5%, due to an increase in FDI by 7%. Domestic construction steel sales went up by 6.8%. slighly better in comparison with 2018 (6.6%). However, the steel pipe segment’s growth rate went down from 5.7% in 2018 to 2.3%.

GMD – Lackluster Q4/2019 Results

GMD is trading at its three year low of VND 19,900 per share, 31% lower than the target price in our 2020 Strategy report of VND 26,000 per share. Previously, for 2020, we forecast revenue of VND 2,951 Bn (+ 12% YoY) and net profit of VND 528 Bn (+ 3% YoY). We are revising our forecast as we see potential downside in 2020F container throughput. This is because (1) GMD lost a shipping line in Hai Phong by Q4/2019 and (2) Vietnam's import and export trading activities are expected to slow down due to the corona epidemic. In addition, we also note that profit growth from associates in 2020 will be significantly lower than in 2019, due to the larger loss from Gemalink deep-water port joint venture (to be operational by Q4/2020 in Cai Mep, Vung Tau) and profit growth from SCSC is likely to slow down.

REE – Building up for the long-term

In our Strategic Report 2020, we mentioned that REE would maintain the same level of revenue and profit as in 2019. In recent updates, we have reiterated our positive view on the stock.