Exports resilience maintained in Oct 2020 but challenges ahead

Exports resilience maintained in Oct 2020

Vietnam’s exports in Oct 2020 rose by 12.2% yoy, slightly lower than the 16.6% increase in Sep 2020 while imports climbed 9.2% yoy, lower than the increase of 12.6% in the preceding month. The trade surplus was at US$2.94bn compared to US$2.95bn in Sep 2020 and the reading in 10M20 was US$19.6bn, greatly better than US$8.9bn in the same period last year. By products, tech and machinery were still the major driver of the strong export gains. There were also signs of seasonal demand from stronger shipments of toys and furniture. Imports were led by demand for intermediate inputs, especially for tech products.

Q3-2020 AM Note: Upbeat profit from DMX and TGDD to cover for BHX losses

Accumulated 9M-2020 NPAT annual growth rate has turned positive, slightly ticking up by 0.1% YoY and reaching VND 3 Tn, following double-digit growth of 11% in Q3-2020 net profit. The group’s profit growth in Q3 was mainly driven by two chains namely TGDD and DMX (estimated PBT grew by 26% YoY) while the grocery chain BHX has extended its loss to in the quarter. Nevertheless, MWG has accomplished 86% of the 2020 net profit plan which was targeted to decline 10% YoY in the 2020 AGM, while completing 77% of our full-year forecast.

NVL – 3Q2020 Analyst Meeting

9M 2020 performance update. Bottom-line surged on the back of asset revaluation. Delivery process witnessed a sluggish performance but pre-sales are picking up.

9M-2020 NPAT tripled to VND 3,298 Bn, primarily due to solid financial income from gains over divestment of subsidiaries including Phong Dien, Phu Dinh, Phu Tri with value of VND 2,560 Bn and a non-cash gain of VND 2,230 Bn and after revaluating Project C – Thanh My Loi in District 2, HCMC.

Meanwhile, slow delivery process due to Covid-19 has hurt sales which dropped by 60% YoY to VND 3,803 Bn. Accordingly, the company only handed over just 355 units YTD (vs 3,269 units in 9M 2019) from inner-city projects: Rivergate, Sun Avenue, Sunrise Riverside, Victoria Village, Lakeview City, and Newton Residence. In addition, the lengthened licensing procedures from HCMC authorities hindered the hand over progress.

HPG – 3Q2020: Results were better than expectations

HPG’s performance in 3Q2020 was better than our expectations as its construction steel selling volume rose strongly while the domestic market just recovered slightly. For 4Q2020, the company is likely to meet several difficulties, such as rising iron ore prices, and decreasing hog prices. Although domestic demand for construction steel in October was weak, we expect that HPG’s steel selling will recover in late-4Q. For the long-term, HPG is our top pick in the steel industry owing to its strong competitiveness and the growth potential from HRC production lines. Currently, HPG is trading at VND 31,300, which is higher than our target price of VND 29,400. We will update the valuation in our next report.

GEG – 3Q2020 Update: Attempting to reach its 2020 target

Revenue in 3^rd increased by 21% YoY and 17% QoQ thanks to hydropower bouncing back and contribution from the rooftop solar power segment. EBIT increased 20% YoY and 7% QoQ due to higher increase of COGS and selling expenses. More importantly, financial expenses surged by 31% YoY, 18% QoQ. Financial expenses increased due to the Truc Son project. This was generated by a prepayment penalty of VND 470 billion on that project.  It will eventually benefit the company with interest rates down by 2%, thus expenses will fall in the following quarter. Year to date the company has completed 67% and 62% of its target revenue and NPAT, respectively. (Table 1)

ACV – Waiting for the recovery

Q3-2020 revenue and net profit of ACV fell considerably by 69% YoY and 94% YoY, respectively. Accumulated 9M-2020, revenue and net profit plummeted by 55% YoY and 77% YoY, respectively. ACV’s Q3-2020 results relatively better than our previous quarterly forecast.

We estimate total passenger volume in Q3-2020 decreased sharply by 48% YoY. Accordingly, international pax plummeted 99% YoY, reaching nearly 70 thousands pax, but advanced by +20% QoQ primarily due to repatriate flights. Meanwhile, domestic pax extended its of recovery, rising 28% QoQ but still decreasing by 30% YoY, and reached 14 million pax (99% of ACV’s Q3-2020 total pax volume). The Q3-2020 growth rate of domestic volume was less severe compared to Q2-2020’s decrease of nearly 50% YoY.

VSC – Q3-2020 Update: Recovery process

VSC announced its Q3-2020 results with the visible recovery process compared to the previous quarter. Total revenue reached VND 429 billion (-6% YoY, + 9% QoQ). Operating profit and EBT recovered, reaching VND 81 billion (-6% YoY, + 16% QoQ) and VND 86 billion (+1% YoY, +17% QoQ), respectively. Accumulated 9M-2020, net income increased by 20% YoY compared to the low of FY2019.

Fertilizer Industry – New VAT Policy: Benefits are not for everybody

The Ministry of Finance has proposed to the government the draft of the amendment to Tax Law No. 71, in which fertilizer is changed from being not liable to a value-added tax (VAT) to become liable to a VAT of 5%. The draft is going to be discussed and ratified in the ongoing Session 10, National Assembly XIV. If ratified, the new law will come into effect on January 1^st, 2021. We expect the new policy to be a historical breakthrough for the industry, enhancing domestic companies’ competitiveness with imported fertilizer to support a sustainable growth. However, not all companies could benefit from the new policy. It will depend on their types of business and products.

FPT Q3-2020 AM: Growth decelerated due to subdued backlog value signed in the 1H-2020

FPT’s revenue grew by 6%, amounting to VND 7,553 bn, while NPAT went flat at VND 929 bn in Q3-2020. Accumulated 9M-2020, PBT was generally in-line with our estimate, reaching VND 3,814 bn (+9% YoY) and completing 75% of our full-year forecast.

TCB - In hope of robust growth in the next quarter

We expect TCB to maintain good results in Q4 and look forward to solid earnings growth in 2021. In 9M the bank had moderate credit growth, compared to the “room” given by SBV. However, growth in income was still robust. TCB also took prudent action to write off bad debts and record extensive provision expenses. This will relieve some pressure on NPL and LLR, in precaution for probable bad debt formation in the Q4. We think TCB will be resilient to this crisis and be able to recover strongly upon the end of the pandemic.