The Outlook of Consumer Credit in Vietnam

As mentioned in our previous Analyst Pinboard "Consumer megatrends in Vietnam", Vietnam consumer market is considered quite attractive with high and stable growth rates and in recent years. There are many attributes to the development of this market, such as positive economic expansion and the growth of the middle class in society. In addition, due to favorable conditions of the economy since 2014, the Vietnamese consumer confidence index (CCI) has increased, peaking at 129 in 3Q 2018 and 1Q 2019. More specifically about spending trends, in recent years, Vietnamese consumers became more willing to purchase high value items after paying essential living expenses, such as high-tech devices or vacation/travel, to improve living standards. At the same time, payment method gradually shifts from cash to non-cash, and Vietnamese tend to be more willing to borrow for instant purchase instead of saving until they accumulate enough to buy such items.

Result Update on PetroVietnam Transportation Corp (HSX: PVT)

We rate BUY for PVT with a target price of VND20,100 per share, based on the FCFF and P/E method. Including the VND1,000 cash dividend, we arrive at a total return of 29%, based on the closing price on Jun 27^th, 2019.

NTC AGM - Capital to be soon raised for Nam Tan Uyen 3

Nam Tan Uyen Industrial Park JSC (UpCOM: NTC) held its FY2019 AGM on June 27 in Binh Duong. The stock price increased 84% YTD albeit uncertainties related to the deployment of Nam Tan Uyen 3 zone (NTU3). NTC’s source of income should only come from NTU3 at this time. The zone has a total area of 346 ha, in which 255 ha are leasable. Our key notes are as followed:

GEG - Abundant Source of Projects for Renewable Energy Development

In summary, we recognize the will and ambition of the company to become the leading player in the renewable energy industry in Vietnam, considering that the management plans a large portfolio of solar and wind power projects. However, we also need to emphasize that the prospects of these projects are still  uncertain until all legal procedures are completed.  In the coming years, the company plans to maintain 10% cash dividend, corresponding to a dividend yield of 4.5 % at current share price.

VCB – Well-controlled Cost

Given the stable growth of lending activities and lower growth rate of deposit, we believe that interest income will be the key driver of VCB’s TOI in 2019. We also see that VCB has been well-controlling its cost both in operating and provision. Therefore, despite of the absence of one-off income in 2019, we estimate VCB’s PBT will grow 19.6% YoY and be 9% higher than its 2019 plan. VCB’s NPAT will be VND 17.5 Tn (c. +20% YoY), corresponding to EPS of VND 4,277. We revise up our VCB’s target price to VND 72,500, equivalent to 2019 forward PBR of 3.2x.

ACV - 2019 AGM Update

2018 Recap: Passenger growth rate has shown signs of slowing down, PAT increased strongly after applying the service prices increase in accordance with Decision 2345 of MoT.

Impact of US-China trade war on the Textile & Apparel Industry

Overall, the escalation of the trade war has undermined the decline in Chinese textile exports to the US market. Under concerns about the possibility of imposition of additional duties on garment products from China in the future (a USD 300 bn tax package being submitted), fashion companies in the US should shift its orders to the neighboring markets to prevent risks. However, we believe that China has not stepped foot in this war, it is increasingly improving the skills of workers, focusing on producing high quality products, developing upstream textile to minimize the risk of price competition from neighboring countries, including Vietnam.

PDR - Focus on projects in Binh Dinh

Phat Dat Real Estate Development JSC (HSX: PDR) is a longstanding real estate developer whose a major project of under one-hectare clusters in HCMC. As HCMC market has been slowing down, PDR has shifted its focus to the central region. This is reflected in the 5-year plan with CARG of 38% and 51% of the developed land area concentrating in Binh Dinh (171.8 ha) and Quang Ngai (49.8 ha). Part of these income stream will be used to acquire new land bank in HCMC with the expectation of deployment when the market rebounds.

NT2 – Weak 2019 earnings outlook despite of improvement in core business

In summary, we forecast that NT2’s 2019 NPAT would reach VND 753 billion (-4% YoY), corresponding to EPS of 2,569 VND/share. While management team has expressed their will is to maintain cash dividend stable at 2,500 VND/share, we believe that such dividend policy would require the company to use short-term borrowing to finance the shortfall in working capital. This condition would remain until 2022, when NT2 has repaid its long-term debts and has ample free cash flows to pay dividend. We maintain our target price for NT2 stock at 27,100 VND/share, implying a marginal upside from current market price. However, we also recommend investors to wait until the new PPA price for Nhon Trach 2 plant is finalized to assess the outlook and valuation of the company.

HAX – Expect A Slight Increase in 2Q 2019 Earnings

In summary, we forecast that 2019 consolidated NPAT may reach VND 110 billion (+10% YoY), corresponding to EPS of 3,133 VND/share. Including our estimate for 2Q 2019 performance, 1H 2019 NPAT will complete 35% of our 2019 NPAT forecast, quite reasonable due to low 1Q 2019 earnings. At current market price, HAX is trading at a forward P/E ratio of 4.5x. We maintain our BUY recommendation for HAX stock with target price being at 19,600 VND/share.

PGV – Preparing for a restructuring phase

Although 2018 earnings from core electricity production business witnessed strong improvement, the adverse effects from rising interest rates and exchange rates movements has resulted in negative bottom line for PGV in the year. In 2019, we expect that the company would return to positive earnings level despite no significant breakthrough. However, FY2019 would be an important preparation step in the restructuring phase of the company. Hence, the success of 2019 plan could help PGV achieve significant improvements not only in its income statement but also in balance sheet.

A brief look at ERP system, from the recent issue of PNJ

The impact of the ERP incident on business results and stock price in the short term is inevitable, but this does not affect PNJ's competitive position and growth potential in the long term. PNJ's decline in Q2 revenue is also not a sign that the company is entering a difficult period when demand decreases. On the other hand, it can be seen that difficulties in implementing ERP on a large-scale system is a significant barrier in both cost and difficulty for other jewelry chains if they want to catch up with PNJ. We believe that short-term corrections of PNJ stock price will be good buying opportunities for investors with long-term vision.