BWE – Aggressive Capacity Expansion Plan to Meet Rising Demand

In summary, in the middle and long term, BWE has an aggressive capacity expansion plan for both water supply and waste treatment segments to meet the rising demand. This strategy results in large capex in the coming years. With the current retained earnings of BWE, we believe that the company will arrange adequate equity, which we estimate to be VND 600 billion in the next two years, to fund its capex without issuing stocks. In addition, the increase in water selling price by 500-800 VND/cbm annually will boost earnings of the company in the coming years, strengthening our belief that the company will have enough equity to launch its expansion capacity plan.

Regarding our investment view, as the business of BWE is naturally capital intensive in the coming years and the company has monopoly on supplying water in Binh Duong province, the stock would be suitable for value investors who prefer low-risk investments and has long time horizon. In addition, we also believe that BWE could be attractive for investors with Environmental, Social and corporate Governance (ESG) constraints as the business creates net positive environmental impacts.

PVS - Update on 2Q2019 Preliminary Result

Despite the low earnings in 2Q2019, compared to the same period last year, we keep the positive view for PVS and still believe that the company will be the most beneficiary from the major Oil&Gas projects in the next few years. We reiterate ACCUMULATE for PVS at the target price of VND28,000. Plus the cash dividend of VND700 per share, the total return is 19%, compared to the closing price on July 11^th 2019.

BVH 2019 AGM – Development Plan to be Revised down

Fierce competition, low G-bond interest rate environment and  the lack of capital will be hindrances to BVH growth in the near future, causing the development plan to 2020 to be revised down. As a result, sales could not growth as strongly as in 2016-2018 period. However, Circular 01/2019 and changes in life insurance product mix are the positives that support the profit recovery of the insurance business.

BMP- Result update report

Rong Viet Securities Corporation hereby presents the Result Update on Binh Minh Plastic JSC (HSX: BMP) with the overall opinion as follows:

BMP has been among our favorite stocks because of its position as an industry leader as well as its healthy financials. We maintain our view that Binh Minh is the top plastic pipe brand perceived by consumers in Southern Vietnam. This allows the company to enjoy sustainable profitability and strong operating cash flows. Accordingly, we expect BMP to maintain its debt-free status and to hoard a substantial amount of cash, most of which would be paid out as cash dividends. Considering the recent market price movement, we suppose that the 8.6x forward P/E may be suitable for investors with a long-term target. Our valuation determines BMP’s fair price at VND 51,100 per share, implying a 10% total return as of the closing price on July 10th, 2019 as we recommend to ACCUMULATE the stock.

Waterpoint – Sales kick-off event

On July 9^th, 2019, we joined a sales kick-off event of Waterpoint project held by Nam Long developer. It is considered to be the most important project of Nam Long since its establishment.

LTG 2019 AGM update - Out with the old, in with the new

After the application of KPI-based performance management system in 2018, the 2019 Annual General Meeting (AGM) still focus on personnel and management policies. Many senior positions appointed in a short time. The remuneration and bonus of key leaders have also been changed, directly tied to the company's profitability. This demonstrates the determination in transforming the corporate governance and management strategy of Loc Troi.

We believe that the unfavorable prospects of the crop protection chemicals (CPC) and rice segment have somehow speeded up the process of changing. Although there are still many potential risks, this move shows the openness from a previously state-owned company, which is usually considered to be inflexible. However, it still needs time to prove effectiveness.

We forecast that 2019  net revenue will reach VND 8,975 bn, decrease slightly by 0.6% compared to 2018. PBT is estimated at VND 340 bn in 2019 (-17% YoY). Note that we do not include an estimate of the extraordinary pre-tax profit from asset liquidation and restructuring the rice segment according to LTG's 2019 plan of VND 162 bn. If this extraordinary profit is included, estimated AT is about VND 470 bn (+ 14% YoY).

Using a combination of PE and FCFF valuation methods, we estimate the fair value of LTG stock at VND 24,200/share and anticipate a cash dividend of VND 1,600 per share in the following 12 months, which results in an 11% total return from the closing price on July 3rd, 2019. We recommend to ACCUMULATE  the stock.

Trade Tension Hastens Northern Leases

In sum, we think trade tension will remain for a while; or even any reconciliation is achieved, manufacturing shift will be still intact given China’s current low fertility rate (1.62 versus ASEAN’s average of 2.17), higher labor costs (1.61x of ASEAN’s average) and overly concentrated risks of production. We learnt that most enterprises that plan to move out of China have been keeping low profile amid the tension due to issues related to layoffs, compensation for workers, the relationship with suppliers or even the stock price. Recent reports said that Apple has been encouraging its major suppliers, including Foxconn, Pegatron, Wistron, to look for other options. Uncertainties of Trump’s action should hasten the exodus. Firms see the move is a must regardless of whatever tariffs imposed. The relocation however takes time, of at least 18 months for such some huge enterprises.

Real Estate Update in Binh Tan District, Ho Chi Minh City

Situated to the west of Ho Chi Minh City, Binh Tan District covers a massive area of 52 square kilometers, and scattered across 10 different wards. The district was originally a part of the ultimate suburban Binh Chanh District before the city government decided to split them up in 2003.

Among the 10 wards of Binh Tan District, probably the most familiar name is Binh Tri Dong since it houses Aeon Mall Binh Tan, the iconic shopping mall where the young in Ho Chi Minh love to hang out and eat at the food court

VN30 Review

HOSE stock exchange will announce the result of VN30 review on July 15^th  and it will be implemented on August 5^th.

We suppose that HOSE will delete CII (due to its market cap beyond top 40) and DHG (due to its free float below 10% while its adjusted free float market cap below median of top 90%). Contrarily, TPB and KDH will be added with weight of 1.5% and 1.16% respectively.

E1VFMVN30 ETF is tracking VN30. Thus, E1VFMVN30 ETF will rebalance on August 5th. It will sell off 1.8 mn shares of CII and 0.35 mn shares of DHG. Additionally, EIB (1.7), FPT (1.16), VCB (0.7) and MWG (0.5) will be sold. By contrast, TPB (4.3), TCB (4.0), KDH (3.3), and HPD (2.4) will be added.

MPC AGM - 2019 Plan Needs Great Effords

Although the company has adjusted down its 2019 plan, we still concern its ability to complete the revised plan. EVFTA, if comes into effect in 2020, is not likely to support sales as EU is not among strategic markets of MPC. The risk of being charged guilty for anti-dumping duty evasion in the US market does exist while the back-up plan is not clear. In addition, the company unclear answers to many strategic issues as well as important differences in business and investment plans before and after the private placement to Mitsui raise doubts among us about the transparency of the management. We recommend investors to MONITOR this stock.

VGBs’ issues: “Strange signal”

Following the government bond auctions, we figure out a strange signal which the offering value plunged and was divergent from the published plan of 2Q 2019. In this quarter, Vietnam State Treasury (VST) successfully issued VND 35.6 trillion, well below the target of VND 80 trillion. In 1H2019, the department got VND105 trillion, equivalent to 70% of the initial plan. Remarkably, the lower-than-targeted outcome was because VST intentionally reduced the offering scale in 2Q 2019, in our point of view. The ratio of offering to planned value was at 0.6 times, the lowest level in recent 3 years. In 3Q 2017, the figure was at 0.8 times.

NKG- AGM Updates

NKG's 6M2019 net profit is estimated at VND 20-25 billion. Thus, Q2’s NPAT alone is estimated at over VND 120 billion. We found that when the price of hot rolled coil (HRC) in 2Q was barely higher than 1Q (USD 557 per ton compared to USD 548 per ton), the profit was achieved by two transfers of Nam Kim 1 Plant and the capital contribution in the Nam Kim Corea JV. In addition, we believe that the NPAT may partly be due to a sharp decrease in interest expenses due to short-term debt reduction. Therefore, it is likely that core business in 2Q of NKG has not fully recovered.