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.

HAH - Robust container transportation performance led the significant profit growth

• Q2-2021 revenue was VND 449 billion (+72% YoY) while NPAT reached VND 98 billion (+150% YoY) largely driven by the container shipping business on the back of higher transported volume as well as income leasing vessels. For 1H2021, the accumulated revenue was VND 808 billion (49% YoY) and NPAT amounted to VND 183 billion (+161% YoY). While the former has accomplished 49% of full-year guidance, the latter has exceeded the plan by 16%.
• Hai An Port operation: Q2-2021 throughput volume reached 104,189 TEUs (+42% YoY). Consequently, accumulated throughput was 196,897 TEUs (+28% YoY). Domestic volume, which comes from HAH’s fleet, was 140,473 TEUs, accounting for 71% of total volume.
• Sea freight operation: Transported volume reached 125,404 TEUs in Q2-2021 (+83% YoY). For 1H2021, accumulated transport volume was 238,186 TEUs (+66% YoY). Notably, the proportion of international transported volume reached 35% in 1H-2021, while it was 13% for 1H-2020 domestic transported volume was 154,209 TEUs. More importantly, freight rates for both international routes and domestic routes extended their rally, which largely helped expanding profit margins.

STK: Social distancing to disrupt recovery path

• In 1H2021, STK recorded revenue of VND 1,077 Bn (or USD 47 Mn, +24% YoY) and NPAT of VND 141 Bn (or USD 6 Mn, +157% YoY). This strong growth is attributable to: 1) the recovery of orders in major markets, 2) a product mix shift towards high-margin recycled yarn.
• Social distancing in Vietnam has been delaying STK's orders due to supply chain disruptions and reducing the number of workers at the factory.
• Long-term growth potential remains bright, mainly driven by: 1) strong demand for recycled yarn, and 2) doubling capacity by adding Unitex factory to boost recycled yarn revenue.
• STK’s market price rallied 40% since early June 2021, reflecting the expectation of profit recovery in 2021 and the rosy long-term outlook of recycled yarn. Risks that need to be monitored further include prolonged social distancing and the progress of the Unitex factory. We are revising the target price.

Oil & Gas Sector: Looking back at 1H2021

• Oil price to surge thanks to OPEC+ cuts and the recovery world oil demand.
• Shale oil production remained low.
• Not all oil & gas companies to benefit from the increasing oil price in 1H2021

Rice price may drop to compete with India

• Rice exports decreased in 1H2021 due to a decrease in volume as the main import partner, the Philippines, reduced its imports. The average export price increased due to an increase in the proportion of high-quality rice and limited supply.
• Competition with India will increase in 2H2021, so the export price will likely drop to ensure a high level of export volume.

NT2 – Low business results in 2Q2021

• Volume in 2Q2021 reached 955 mn kWh, -23% YoY, nearly equal to that in 1Q2021. Contract volume (Qc) was 795 mn kWh, accounting for 83% of total volume, -28% YoY.
• Revenue in 2Q2021 was VND 1,616 billion (or USD 70 million) -2% QoQ and -14% YoY; NPAT was VND 25 billion (or USD 1.1 million), -79% QoQ and -90% YoY because of (1) A decrease in fixed price in the sale price, (2) Gas price surging and (3) Retrospective in 1Q2021. Accordingly, the 1H2021 NPAT reached VND 139 billion (or USD 6 million), -67% YoY, completing 30% the 2021 target.
• Better outlook is expected in 3Q2021, from a low base in 3Q2020. Longer term, NT2 will become a cash cow. It pays dividends for shareholders owing to no investing activity and debt payment obligation.
• We revise down the target price to VND 22,900 due to a decrease in fixed price in sale price and a gas price upward trend in the medium term. With the remaining VND 1,000 dividend for the year 2020, it offers an upside of 29% compared to the closing price on 30^th Hence, we recommend to BUY this stock.

ACV 2021 AGM Note – Management’s strong belief in a brighter 2H 2021 to fuel ambitious plan for passenger throughput volume

• The AGM approved the 2021 plan with a total revenue plus financial income of VND10,564bn (-8% YoY) and PBT of VND2,359bn (-29% YoY). 6M-2021 preliminary financial results completed 49% of the former while fulfilling 52% of the latter.
• Management believes that the global vaccination campaign will rapidly bring the aviation industry toward pre-covid levels, fueling the ambitious passenger throughput volume guidance.
• It also expects that the aerodrome assets ownership issue, which is the root cause of the equitization settlement delay since 2016, will be resolved in Q3-2021.
• The current TP of VND 80,800 is under review since the pandemic in Vietnam has developed much worse than expected.

NKG – Robust demand overseas will support the bottom line in 2H

• NKG’s GPM in Europe and North America can reach 19% due to large price differences.
• The company received sufficient orders for production until November, allowing factories to run at full capacity despite weak domestic demand.
• We forecast that the company’s revenue and NPAT will reach VND 8,140 billion and VND 700 billion in 3Q, increasing by roughly 140% YoY and 620% YoY respectively.
• We recommend to BUY NKG with a target price of VND 41,000. Coupled with a cash dividend of VND 500/share, the total expected return is 30%.

Japanese Equities: down we go

The Topix Index, at 1906 (July 18), has been unable to break the 2000 level, the March 2021 top,  which is indicative of weak momentum (Figure 1). In fact it looks like it is rolling over and 1780-90 is in sight. We doubt that asset allocators are adding to their Japan positions at this time.