DPM – Update on 2Q2021

• 2Q2021 revenue of VND2,980bn (+34.3% YoY) while NPATMI of VND684bn (+125.7% YoY).
• DPM recorded VND99bn of other profits (including VND91bn from the insurance claim for business losses) and adjusted down VND132bn in expenses, related to 2020 depreciation (VND49bn) as well as maintenance costs (VND83bn).
• For 3Q2021, revenue and NPATMI are anticipated at VND2,716bn (+38.9% YoY) and VND391bn (+114.8% YoY), respectively.
• The stock price has been rising significantly to reflect the impressive 2Q2021 earnings but the current valuation is not cheap if looking at 2022 prospects. The fair price of DPM is evaluated at a price of VND31,600

Container Shipping: Extraordinary Growth in Global Freight Rate Shows No Sign of Relief

• Congestion has been spreading over terminals in China, Northern Europe, and Northern America due to the Covid-19-induced supply chain disruption, and as a result, intercontinental freight rates are continuously rising. The World Container Index (WCI) has more than doubled since the beginning of the year (from USD 4,359/FEU to USD 9,421/FEU).
• Pressure from growing transport demand, amid shortage of vessels and equipment, has pushed charter rates up sharply (Harpex Index has tripled YTD).
• Despite the sharp increase in international rates, domestic rates have not fluctuated much due to the disproportionate transport demand as well as sufficient transport capacity of domestic shipping liners.

Update on the construction industry 6M2021 - Near-term headwinds

• The increase in material prices along with fierce competition shrank the profit margin of construction companies. However, some players found a way to escape.
• The market suffered from several waves of Covid-19 by freezing construction activities and project launches of developers.
• Market outlook for 2H 2021: Accelerated public disbursement in infrastructure is pivotal to uplift the industry. Besides, investment opportunities are concentrated within some businesses’ own growth stories.

US Dollar as a risk signal. Is it still working?

• US inflation (CPI) data released last week were in line with expectations.
• The US Dollar (USD) reacted negatively but stocks went up.
• Decorrelation between risk aversion and a strong USD?

The outbreak takes a toll on export growth

• Vietnam’s export slowdown in Jul 2021.
• Exports of most key products saw a significant deterioration.
• Imports remained strong as Covid-19 restrictions put pressure on domestic supply.
• Vietnam’s exporters are grappling with higher operating costs and logistics bottlenecks

DBD – Strong performance in 1H

• Revenue and NPAT in 6M were VND 600 billion (-5.1% YoY) and VND 94 billion (+16% YoY), completing 42% and 64% of annual plans, respectively. The annual revenue target is hard to achieve due to the pandemic, however, DBD expects the NPAT target can be fulfilled.
• New anti-cancer medicine factory’s construction process has been completed and DBD expect it can obtain EU-GMP for an injection production line in 1Q2022.
• Anti-cancer medicine revenue increased strongly by 51% YoY in 1H, contributing 15% to total revenue.
• DBD aims to rise its market share in the dialysis fluid segment from 11% in 2020 to 30% in 2025.

Power industry: Temporary demand–supply imbalance

• Demand growth has not kept pace with supply yet, total national volume shared smaller part for electricity plants, both thermal and renewable energy plants are not fully utilized.
• Hydropower and renewable energy plants captured the thermal plant portion in 1H2021. Thermal plants were affected by hydropower and renewable energy as the utilization declined, offering room for hydropower and renewable energy.
• Hydropower and wind power will perform well in 2H2021 thanks to hydrological support and commercial operation from wind farms.

MBB – 1H2021 Performance: Reinforced asset quality

• Better-than-expected income growth led by NIM expansion but much higher-than-expected provision eroded PBT. The preferential lending rate program in 2H will pressure NIM slightly.
• Bad debt formation reduced and bad debt written-off surged in Q2 made stable asset quality. We forecast that NPL ratio can rise from the current record low but will be controlled lower than last year, relieving credit costs in 2H.
• CIR was slightly better than expected. However, the figure will not improve notably soon due to large investment in IT and the southern market expansion.
• We maintain our target price of VND 36,100/share and a BUY This translates to an upside of 22% from the closing price of August 10, 2021.

F&B Industry – FMCGs spending is reaching the two year peak

• The 4^th Covid-19 wave is impacting seriously on F&B spending in 2H-FY21, with the mass closure of restaurant chains and F&B delivering services, while many traditional markets are closed due to increasing Covid-19 infection cases. Due to more persistent impact of Covid-19’s outbreak, the change in consumer behavior will be stronger than that of the 1^st Covid-19 wave. In which, we expect demand of essential foods, focusing on basic FMCGs and packaged foods to surge in 2H-FY21 amid the strict social distancing under Directive 16.

Banking sector – Expecting temporary slowdown in credit growth

• Credit expansion was resilient in June as well as the first half despite the outbreak of the COVID-19.
• We project a 9.5-10.5% year-to-date credit growth for the third quarter, driven by lower lending interest rates, the uneven impact of the pandemic on demand and easing lockdowns.
• The latest lending rate reduction is likely to lead to pressure on NIM for a quarter, since the headroom for cutting operating expenses is not abundant and the SBV is looking forward to stabilizing deposit rates.

US: the inflation denial

It is obvious that inflation is here. Those who claim that this cannot be true because Treasury bonds aren’t showing it fail to mention that Treasury bonds are the most manipulated asset class on the planet. It is difficult to argue that Treasury bonds can discount or measure much of anything when the Fed is spending over $1 trillion buying them every year. Technically, all what yields are reflecting is what $1 trillion worth of Fed asset purchases can get you in terms of manipulation.