NTP – Becoming a Cash Cow

We think the brand name Tien Phong Plastic Pipe can be described as a “cash cow” at the moment. After a period of constant spending on capex to raise capacity, NTP has started to see positive net cash flows by exploiting its vast capacity, developed distribution system and a relatively powerful position in the industry.

Fertilizer – 2019 preliminary results and opportunities for 2020

Due to difficulty in the plantation activities, the fertilizer industry is likely to end 2019 with declining business results as total sales volume dropped due weak demand. Profit margins continue to remain as low as in 2018.

Update On The Aviation Industry

In 2019, Vietnam's aviation industry continued to experience a healthy double-digit growth amid issues at some key airports. Overall air traffic volume was up 12% YoY and reached approximately 116 mn pax. Although the growth rate of international passenger traffic continued to outpace domestic passenger growth, the gap between the two has contracted. Domestic passenger volume growth rate was estimated at 11% YoY, picking up strongly from 6% YoY in 2018. We believe this was likely driven by new supply from brand-new carrier Bamboo Airways, following years of not prioritizing the domestic market by incumbents (VJC, HVN, and Jetstar Pacific). On the contrary, international passenger volume’s growth rate showed a moderate deceleration, up 14% YoY in 2019 vs 21% YoY in 2018. Though this growth rate was in line with the foreign inbound tourist arrivals by air of 15% YoY for 2019, we attribute this slowdown to the estimated sluggish int’l pax volume rise of only 5% YoY at Tan Son Nhat Airport (SGN), which accounts for over 40% of Vietnam’s int’l air passengers. Its runways and passenger terminals are experiencing serious overload issues. In the meantime, other major terminals such as Noi Bai (HAN), Cam Ranh (CXR) and Da Nang (DAD) all maintained double-digit growth in terms of international passenger volume at 14%, 25%, 23% respectively.

F.Beauty – FRT’s New Experiment

In late 2019, FRT launched F.Beauty – a health and beauty specialist chain, with the first store located in Hanoi. After Long Chau pharmacies, F.Beauty is the second step in the diversification strategy of FRT since its major market, smartphones, is now saturated.

Construction Industry in 2020 – Intermediate-term Growth Drivers Needed

Similar to our expectations at the beginning of the year, the construction industry continued to struggle to find growth drivers after the peak in 2017. Large general contractors fell one by one out of our conviction list due to both external and internal shortfalls. Lengthy legal processes caused many developers to experience delayed progress at their construction sites, while the banking system’s credit policy resulted in a lower value of new housing projects. Even though industrial and infrastructure construction managed to grow substantially, the whole construction industry has still been impacted by a slowdown in the housing market.

Condominium market updates

The market this year was driven by the launches of large-scale projects from Vinhomes. In terms of condominium transaction volume, during 9M 2019, Hanoi saw an increase of 22% yoy while Ho Chi Minh improve slightly by 5% yoy. On the other side, excluding three large projects from Vinhomes, the residential sector in these cities remained relatively bleak due to legal processes. Demand was still good with a high absorption rate. Selling prices in the condominium segment increased by an average of 15-20% compared to the end of 2018, led by a decrease in supply.

US Manufacturing activity hits 10-year low

 President Trump was elected in 2016 on a platform which promised manufacturing jobs to return to the US. Well, it does not appear to have worked so far. On Friday (Jan 2nd), the Institute of Supply Management said that its manufacturing index (known as the PMI) in December fell to its lowest level in a decade to 47.2. It decreased by 0.9% from November. A level below 50 indicates a contraction. Economists expected a reading of 49. December also represents the fifth month of contraction for the US manufacturing sector.

Bancassurance income outlook at some listed banks

In the context of closer control on credit growth and more litmited room to expand NIM, banks are trying to boost service income from cross-selling activities.  During 9M2019, the portion of service income on TOI for ten banks under our watch list have moved up to 10.5% from 9.6% in 2018, reflecting a more sustainable income structure. We found that amongst many activities that became popular service income sources for banks, bancassurance became a crucial growth driver, especialy bancassurance life-premium. We see bancassuance income to have much potential to grow both at sector-wide and individual banks level.

Vietnam’s pharmaceutical industry – Opportunities and Challenges

The Vietnamese pharmaceutical market has a lot of potential coming from the demographic, rising income and priority policies of the Government, however, as with any development of other industries, after the fragmented phase will be the competitive and selective one. The end goal is for consumers to use medicines with high quality standards and reasonable prices.

VHC – 11M2019 update and 2020 forecast

VHC in the short term, particularly in 2020, more or less, will be affected by cyclical fluctuations of the pangasius sector. In the long term, continuous investment in capacity of farming, processing, product development, especially the potential collagen-gelatin segment, as well as diversifying distribution channels will help the Company minimize the cyclical effects of the industry on profitability. Based on the closing price on December 31^st, 2019 of VND 39,650 / share, we recommend BUY for VHC with a target price of VND 49,200/share. Total return is 24%. The company does not pay cash dividends for 2019.

PVB - 2019 result update and 2020 forecast

We forecast that the revenue will reach VND714 at least while the maximum of net profit is likely to be around VND128 bn. Noted that most of its profit will be booked in 1H2020 due to the progress of two main projects Nam Con Son 2 Phase 2 and Sao Vang Dai Nguyet.