Higher interest rates not yet a threat

• Interbank rates formed a new ground but the banking liquidity is still good.
• Government bond yields slightly increased.
• Deposit rates modestly inched up while lending rates remained stable.
• Policymakers will keep monetary policy accommodative by controlling inflation.

Risk appetite is still too high.

• Inflation risks are not really priced in equity markets.
• 10-yr bond yields are rising at a faster pace than central banks are/were expecting.

VNM - Material price increase to raise pressure on Vinamilk’s profit margin

• We are cautious that VNM’s business results will only post low single-digit growth rate of both revenue and NPAT in FY2021, mainly due to (1) the weakening demand of dairy products amid extending Covid-19 in Vietnam and (2) unavoidably negative impact of material price surge on its profit margins.
• FY2021 estimated revenue and NPAT to post VND 59,694 Bn (or USD 2.6 Bn, +0.1% YoY) and VND 11,487 Bn (or USD 498 mn, +2.2% YoY) respectively, completing 96% revenue target and 102% NPAT target. Correspondent 2021 EPS will be VND 4,887, and 2021 forward PER will be 18.5x.
• We are prudent about its upside prospect in FY2021 as the company will be lacking of new investment stories, backed by our concern that saturation phase of Vietnam dairy market is coming sooner than our previous expectation. Therefore, we recommend to ACCUMULATE

MSH – Rebounding from a low base. High capacity expansion from 2022.

• At the current market price, PER forward of 2021 and 2022 are 7.6x and 6.7x, respectively, lower than PER of 8.6x in 2020. Our one-year target price is VND 64,200/share. With an expected dividend of VND 3,500/share, the total return is 28% compared to the closing price of May 11, 2021. We have a BUY on MSH.

MWG Q1-2021 AM Note

• Procurement issue at BHX hampered SSSG (-10% in Q1-2021), translating into larger estimated quarterly losses of VND639Bn (vs VND-609Bn in Q4-2020 and VND-416Bn in Q1-2020), despite improved GPM.
• TGDD & DMX’s estimated that Q1-2021 EBIT swelled by 16% YoY mainly on the back of higher GPM, though SSSG posted weak performance of -9%.
• The TP of VND184,000 is under review given the current situation of CE products demand and issues related to BHX’s procurement process.

KDH – Lovera Vista to lead 2021 results

• Earnings in Q1 2021 grew 33% backed by the delivery of Safira and Verosa Park projects.
• 2021 results will be driven by the recognition of Lovera Vista.
• Current valuation (P/B of 2.4x) looks relative attractive compared to peers’ mean (P/B of 2.9x). We will update our target price in upcoming times by reflecting the new condo project (1000 units) in Binh Tan.

Rising China forces Europe and India to forge a closer relationship.

Saturday (May 8), leaders of Europe and India will meet via videoconference to discuss a potential realignment of their turbulent relationship. The EU geopolitical ambitions could start to bear fruit? Maybe because of the ascension of China on the world scene, European leaders will have to find a way to deal with the world’s largest democracy in order to promote their interests in Asia.

Automotive Industry - Semiconductors scarcity may slow down the industry’s growth

The lack of semiconductor chips will cause car sales to flatten in 2Q and 3Q of this year before growing back in 4Q as the supply becomes more plentiful. The supply is limited while the demand is increasing, making it difficult for selling price to decrease and possibly increase with the cost of raw materials in the future. For the whole year 2021, the results of automobile companies will grow thanks to increased output (mainly in 1Q and 4Q) and better profit margin.

Drug bidding results YTD – Positive signs from leading domestic companies in Tier 2

• Domestic companies have been gaining a higher market share in Tier 2 mainly due to favorable policies and competitive production costs.
• IMP has won the highest value into the ETC channel among Vietnamese listed companies and posted strong growth in terms of bidding value compared to the similar period last year.
• IMP showed its strong competitiveness in the Cephalosporin segment and the IMP3 factory is its main growth driver in 2021.

TCB – Maintaining competitive advantages

• CASA ratio slightly decreased in 1Q2021 due to seasonality of corporate customers. The drop in deposit funding costs in 2020 and 1Q2021 was attributed more to lower interest rate than the higher CASA ratio.
• NPL ratio is expected to be higher towards the year end. However, TCB is projected not to suffer significant increase in credit costs.
• We maintain a target price of VND 50,900/share and a BUY This translates to an upside of 17% from the closing price of May 4 2021.

Update on credit growth in 1Q21

• Credit growth grew at a faster pace than a year ago.
• Credit to priority sectors expanded at slower pace than overall credit growth.
• Further supports for bank’s customers impacted by the pandemic.
• Credit to risky fields will be strictly controlled

We remain bearish on the US dollar.

• The inability of the USD to move higher in a period where US stocks are at record high is symptomatic of inherent dollar weakness.
• Maybe crypto currencies are shaving something from the USD dominance as a safe haven currency!
• ASEAN currencies are behaving well.