BVH – Responding to low G-bond interest rate situation by adjustments in sales and investment

As mentioned in our previous notes, fierce competition, declining G-bond interest rates and the lack of capital are hindrances for BVH’s top and bottom line growth. Adjustments have been made to adapt to the situation. The 2020 plan (announced in 2019 AGM) was prepared using the same technical interest rate as of 2019. Therefore, a sharp decline of G-bond interest rates, if any, would affect negatively BVH’s 2020 performance.

The Ministry of Finance, which owns 72% of current outstanding shares has not so far had any plan of divestment by 2020. This is an obstacle for BVH’s growth because it limits BVH’s ability to raise capital to finance its operations.

MWG - Update from the Q3/2019 analyst meeting

In 9M/2019, MWG posted a growth of 17% in revenue and 36% in NPAT YoY, fulfilling 71% and 83% of the year plan respectively. In Q3 only, revenue increased by 20% and NPAT increased by 32% YoY, profit margin decreased due to an increase in promotion expenses for the company's 15th birthday sales event. Both consumer electronics and groceries exceeded the target for number of stores set at the beginning of the year. Bach Hoa Xanh’s faster-than-expected expansion also increases cost and extended the break-even period of this chain.

Update on Crude Oil

The triple bottom for West Texas Intermediate (WTI) has been confirmed at around USD 52/bbl, a level that has been a formidable support since June 2019.

Update on Vietnam’s Exports/ Imports

According to Customs, Vietnam was a net importer of USD 0.4 bn in the first 15 days of October. Although export growth decelerated in October, Vietnam still turned out to be a net exporter for that month by USD 1.9 bn. Import growth was only 2.8% YoY in the month. Vietnam’s exports and imports increased by 8.3% and 7.7% YoY for the first ten months of the year, respectively. The trade surplus reached USD 9 bn.

Vietnam’s import growth decreased sharply in October due in part because imports of FDI fell 5.6% YoY. Exports and imports of FDI accounted for 69% and 58% of Vietnam’s total exports and imports so far in 2019.

BMP – Maturity Stage Starts

Despite Q3 being the low season for construction activities, BMP still achieved 25,700 tons of sales volume this quarter, up slightly by 5.7% over the same period last year. Net income was stable at VND 120 billion (+4.3% yoy). For the first nine months of 2019, BMP’s sales reached 76,400 tons, (+15.6% yoy mainly due to Q1/2018’s expectedly low sales). According to the parent company Nawaplastics, BMP's sales growth is similar to the trend observed among other Southeast Asian producers in recent months, which have been affected by the prolonged dry season. BMP's 9M2019 NPAT is stable (-3.5% yoy) and its gross margin has been at 23% for a few quarters, which is within our expectations.

Outlook for the Jack Up Market in South East Asia

Due to the recent downtrend of oil price, E&P activities have slowed down and have only experienced some improvement since 2018. The demand for Jack Up rig has recovered, according to the slight increase in two main indicators: rig day rate and utilization rate.

VNM - 9M 2019 Update

Rong Viet Securities combines two valuation methods: FCFF and PE to evaluate VNM’s fair value. The stock is worth VND 135,000  per share, with a cash dividend of VND 5,000 per share in the next 12 months, resulting in a 8%  total return based on the current closing price. Therefore, we have an ACCUMULATE on this stock.

CTI_9M update

We recently had a meeting with the management of the company and the  following are the key takeaways:

• CTI posted NPAT-MI in 9M 2019 of VND 56.1 billion (-47% YoY), due to the lack of revenue from key construction projects.
• The company will revise down the profit guidance in 2019 by 29%, due to the delay in some infrastructure projects’ progress. This will result in a decrease in net profit of 19% YoY. Therefore, the stock will trade at a PE trailing 2019 of 15.6x.
• CTI also cancels the equity raising plan of VND 220 billion due to changing in business plan.
• The company will maintain a 10-15% cash dividend payment policy in coming years.

HDB – 9M2019 Business Performance Update

We are noticing a better-than-expected interest income expansion from the parent bank thanks to impressive NIM improvement, accompanied with a recovery in HD Saison who is also trying to catch up with overall credit and earnings growth. However, other incomes are shrinking and have a limited impact on operating income growth. The positive is that both operating expense and provision charges are well under control, supporting earnings growth of 20% YoY. Current CAR (under Basel II) is at 11%, which spares sufficient capital for HDB to maintain strong credit growth in next several years.

HDB is currently trading at VND 29,100, equivalent to a 2020 forward PBR of 1.2x, which is relatively attractive considering the potential growth of around 20%/year in 2019 and 2020. We raise our target price to VND 33,500, equivalent to a potential upside of 15%, thereby keeping an Accumulated rating on the stock.

EVFTA – Export taxes reduction to encourage the EU’s pangasius consumption

The EU-Vietnam Free Trade Agreement (EVFTA), expected to take effect in mid-2020, will encourage the EU’s pangasius consumption  in the upcoming years.

Industrial park_9M updates

2019 has been a good year for the industrial park industry, as leasing demand remained strong. In the North, Bac Ninh and Hai Phong are bright spots for attracting FDI inflows while Dong Nai and Binh Duong play a key roles in the South.
During the first 9 months of 2019, industrial park companies achieved impressive business results, especially developers owning available land bank for lease with large-scale areas.

Update on the brokerage sector: 3Q earning results

Based on the results of 73 brokers for 3Q, PBT reached VND 2,106 bn, -18.9% YoY. While gross profit grew steadily around 15% YoY, operating expenses (*) increased sharply by 52,8% YoY, causing the PBT to decline.

(*): We adjust interest expense into Lending segment’s expenses