TCM – 9M2019 Business Results Update

Overall, Rong Viet Securities considers to revise the target price of TCM in the next issue report compared to the previous target price of VND 28,000 per share, due to concerns about (1) unfavourable market condition of cotton yarn segment, (2) unclear expansion of its factories in the short run as its factories already ran at full capacity, (3) the risks of bad debts from these two large customers as the firm has yet to find out alternative orders, (4) the plan to relocate its factory from Tan Binh Industrial Zone to Vinh Long province in the medium term makes us concerned about the reduction of labor productivity. The company is most likely to have to recruit its labor forces here compared to the stable, skilled workforce in HCMC.

DXG – Brokerage segment to drive business

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

• DXG posted 9M’s revenue and net profit of VND 3,798 billion (+17% YoY) and VND 907 billion (+21% YoY), respectively. During the period, net profit was driven by the divestment of a residential project in Nha Trang city (VND 220 billion) and the growth of DXG’s brokerage and secondary investment businesses.
• For 2019, DXG set a profit guidance of VND 1,200 billion (+2% YoY). As updated by management, the company will exceeded this profit target by 8%, reaching VND 1,300 billion (+10% YoY).
• Real estate development plan: DXG plans to launch 8 residential projects to the market in 2020, of which Gem Riverside and Long Thanh township are notable ones.
• DXS, its brokerage and secondary investment businesses, plans to IPO in 2H 2020. After the IPO, DXG will hold a 70% stake in it.

US: is there a case for stocks over bonds?

The dividend yield on the S&P 500 Index is at around 1.89%. It has surpassed the yield on the 10-year Treasury note of 1.69% for the first time since 2016. This usually indicates that stocks will outperform bonds within the next 12 months after this happens; in fact in 94% of the cases.

HND: Stable Operations Despite Coal Shortage

While the electricity market is still undersupplied and coal shortage has become a domestic problem, Hai Phong Thermal Power (HND) still maintains stable operations. 9M2019 business results announced showed  output of 5.9 billion kWh (fulfilling 76% of the year plan, + 1% over the same period); revenue reached VND 8,080 billion (+ 15% over the same period), profit reached VND 607 billion.

Yarn industry still faces difficulties

Although firms are trying to diversify their export markets, shifting to Thailand, Brazil, Japan, etc. The proportion of export value in these markets is still quite small compared to the scale from China. Therefore in the short run, yarn manufacturing enterprises, especially cotton ones, will continue to face difficulties. However, we expect that when the market recovers, China’s yarn inventories have been released, fabric manufacturers will continue to place orders to maintain production and business activities. At that time, the advantage will be largely reserved for firms that having a large production scale and producing high quality products with limited supply in the market.

MBB – Updates on Parent bank’s Business Performance 3Q2019

MBB’s parent bank achieved a positive growth of 41.2% in TOI and 39.2% YoY in PBT in 3Q2019 (which raised YoY earning growth from 22.5% in 1H2019 to 28.5% in 9M2019). Excluding income transferred from associates, actual earnings growth was 29.6% for 3Q and 23.0% for 9M. This growth was largely driven by income from securities trading and debt recovery instead of net interest or service income. Meanwhile, operating expenses and provision charges continued to rise. Considering moderate growth of the parent bank, we hold the view that consolidated earnings growth will still be driven by the insurance and consumer finance business of associates, though operating and provision burden in 3Q is expected to be pressured.

In Sept, MBB has paid 8% share dividends, as well as announced the plan to issue 43.2mn ESOP shares (2% of charter capital) at face value to its employees in Sept/Oct. The bank is still on plan to issue 141mn primary shares (5.63% of post-money charter capital) and 47mn treasury shares (1.87% of post-money charter capital), by the end of 4Q2019.

MBB is currently trading at VND23,350, equivalent to a PBR 2019f of 1.4x. The stock price is 22.0% lower than our target price of VND28,500. We thereby reiterate our BUY recommendation on the stock.

Total industry was not a big concern in September but needs to be watched closely in October

Vietnam’s economy grew strongly in 3Q. Nine month GDP growth recorded its best reading in nine years. However, PMI data from Markit’s survey and headline industrial production index MOM (IPI) do indicate some slowing industrial activity in September.

But still not a concern

Total industry peaked in July and August. During this period, although mining and quarrying activities continued to decline, total industry still maintained its pace thanks to manufacturing activities. In which, manufacture of computer, electronic and optical products contributed significantly. At the same time, we notice a strong pick up in export of phones and parts in 3Q

3Q 2019 Hai Phong Seaports’ Preliminary Business Results Update

Overall market size remained unchanged, dragged down by lower domestic volume while import/export volume growth stayed positive

According to Hai Phong Maritime Administration, total throughput of Hai Phong in 9M 2019 amounted to 3.6 mn TEU, stayed flat compared to same period last year. However, of which, import/export container volume still experienced a healthy growth of 9% YoY reaching 2.7 mn TEU. In general, market share gainers were PHP and Lach Huyen HICT, while remaining players have seen its volume declined or nearly unchanged.

KDH – Maintaining earnings growth

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

• In 2019, KDH set a profit guidance of VND 1,046 billion (+29% YoY), driven by the hand-over of the Verosa Park project. Looking forward to 2020 and 2021, profit growth is maintained at a high level with the recognition of profits from existing projects such as Jamila, Safira and new projects such as Lovera, Verosa Park or Clarita (to be launched in 2020).
• Real estate development plan: KDH continues to develop its land bank in District 9, HCMC, with the launch of the Verosa Park in 2019 and Clarita projects in 2020. Both projects are low-rise components, located in premium location in the East of HCMC. We believe that these projects will have a high absorption rate.

Update on Vietnam’s G-Bond Market in 9M2019

According to the latest data, the State Treasury of Vietnam (VST) mobilized VND 52.6 trillion via Government bond auctions, equivalent to 70% of the quarterly plan and down 2.5% YoY. The winning/offering ratio was at 90%. In the first nine months of 2019, VST raised VND 155 trillion, only completing 59% of the yearly plan but the winning/offering ratio rose to 80% from 50% in 9M2019.

PHR – On its way to be a “key player” in the industrial park segment

In terms of industrial parks, good positioning coupled with a smooth land clearance process are the main reasons PHR’s IPs operate much effectively than other IPs. Their faster processing plan will allow to lease most of their projects next year.