Asian Central Banks’ Shift to More Dovish Policy Stance

Last week, three central banks, including Malaysia, Philippines and New Zealand decided to cut their policy interest rates by 25bps. We see more EM central banks turn dovish as their respective economies slow. Broadly speaking, we identify three groups, including 1) Countries that cut rates due to slower economic growth and inflation including China, New Zealand, Malaysia, and Philippines, 2) Countries that relax monetary conditions after hiking rates last year over inflation and currency pressures such as Indonesia and India, and 3) Countries that leave interest rates unchanged and seem to have had inflation under control such as Vietnam and Thailand.

Vincom Retail – Pivotal year for the development of Vincom Megamalls

Vincom Retail targets to open 13 new malls in 2019, adding 153,000 sqm of GFA, of which Vincom Center Tran Duy Hung launching in late-April is the key project. In addition, three new Vincom Megamalls as components of Vinhomes’ mega residential complexes are under construction, and expected to be put into operation in 2020-2021.

We estimate revenue and net profit in 2Q 2019 will be VND 2,136 billion and VND 685 billion respectively. Vincom Center Tran Duy Hung will contribute to total leasing revenue. FY2019 revenue and net profit are estimated at VND 9,276 billion (+1.7% YoY) and 2,927 billion (+21.7% YoY) respectively

BMI –AGM Update and 1Q2019 Results

We remain cautious to BMI's ability to complete its 2019 plan as the insurance business will take time to prove its effectiveness and the high proportion of stock investment in its current portfolio poses risks. At the April AGM, the 2019 plan was approved and the foreign ownership limit was raised to 100%, paving the way for divestment of two major shareholders namely SCIC and AXA. The foreign ownership removal could prove to be a catalyst for BMI stock price this year. However, the process of finding investors for the transfer of SCIC and AXA stakes will take time and is unlikely to be completed this year.

MWG Update – Begins to accelerate

We maintain our positive view on MWG. Despite the anticipated slowdown in mobile phone sales, the outlook for the electronics segment looks bright. Strategies to increase revenue and save costs are gradually starting to show results at Dien May Xanh . After years of finding the optimal model, the Bach Hoa Xanh chain is now expanding in provinces outside Ho Chi Minh City, resulting in high revenue growth. The company is also focused on optimizing logistics and negotiating with suppliers to increase its gross margins. Back Hoa Xanh has not yet generated profits for the company.

MWG shares are currently trading at a 2019 forward P/E of about 11 times, which is an attractive valuation for long-term investment purposes. We keep our BUY recommendation for MWG shares with target price of VND 125,000 / share.

Thaco Targets to Turn into A Holding Corporation

In summary, as the management showed their preference on a centralized structure at the recent Annual General Meeting (AGM), we believe that the management targets Thaco to become a holding company, in which the parent company will just focus on managing three subsidiaries, including Thaco automobile, Thadi and Dai Quang Minh.

Mechanics and automobile sector will remain the key earnings driver in the coming years while other businesses provide synergies and diversification benefits. Although the auto business may face stiff competition from imported cars in 2019, we still see strong long-term potential given industry growth and inner resources of the company.

Thaco plans large investments in agriculture but it is unlikely the sement will produce significant profits in the short term. As for the construction segment, legal issues related to Thu Thiem land are still under investigation. Until an official result is announced, downside risk for the real estate business remains. However, if resolved, the segment could become a significant catalyst for the company.

Logistics and commerce are supporting businesses but play a vital role in improving operational efficiencies.

Condominium market updates

A recent CBRE report summarizes the overall performance in condominium market in Hanoi and Ho Chi Minh City. Generally, the Ho Chi Minh’s market saw the worst results while Hanoi’s recorded one of the best quarters in the last three years.

Banks’ Credit Growth Limit in 2019

Given limited room to grow NIMs as well as less extraordinary income than before, banks will have to rely more on credit expansion. 

The SBV’s credit growth ceiling is an effective tool to control inflation and credit. However, it also limits the growth ability of even the smaller healthy banks and consumer finance companies that should be able to expand credit more aggressively while maintaining compliance to safety limits and ratios. We believe the very high credit targets set by some banks may be wishful thinking as quotas are unlikely to exceed 20%, as in 2018. For this year, many banks were or will be approved for Circular 41 early adoption, with much stricter capital requirements than current regulations. As such, we think it is more reasonable to let these banks manage their own credit limits, providing all safety limits and ratios are met. 

GMD – Update 1Q2019 Result and 2019 Forecast

We maintain our positive view on GMD. Stable earnings growth of the port operation segment and affiliates (CJ-GMD Logistics and SCSC) will be the main driver for GMD this year. Gemalink Terminal will be operational by 2021 and significantly enhance the capacity of GMD’s port system in the South. However, we don’t expect this project to be profitable in the early years due to large interest expenses. Another risk may come from extraordinary expenses regarding rubber plantation write-offs in Cambodia. We estimate the fair value of the stock at VND 30,000 (P/E forward of 16.4x and P/B of 1.5x). Incorporating a cash dividend of VND 1,500 per share, the total return is 21%. Recommendation: BUY.

MSCI stories of Argentina and Kuwait

• Little to no impact from Argentina's reclassification due to a 40% cap for the two biggest markets in MSCI Frontier Market 100 Index
• Positive impact if MSCI Kuwait Index reclassifies to EM in June 2019
• Kuwait has met most of EM criteria by now

Pangasius in 1Q2019: Exports to EU Surged but Dropped slightly in the US and China

1Q2019 Pangasius export value reached USD 472 million (+ 8% YoY). The 4 main export markets remain unchanged: China - Hong Kong, Europe, US and ASEAN.

SFG – 1Q2019 Business Results and 2019 AGM update

We maintain our negative outlook for the fertilizer sector in 2019. As expected, business results in 1Q2019 fell sharply compared to the same period last year. In our opinion, the ability to complete the plan in 2019 is vague because the two most important factors, weather and input materials prices are hard to predict. On the other hand, Vietnam National Chemicals Group (Vinachem) will decrease its ownership in SFG from 65% to 36% this year or the next, which could support SFG’s stock price in the future. However, currently, we lack specific information about this divestment. SFG is trading at VND 15,000/share, equivalent to 12.2x forward P/E (based on 2019 plan), quite high compared to the overall sector and the company’s growth prospects. The stock seems fully valued.