VNM - 9M 2019 Update

Rong Viet Securities combines two valuation methods: FCFF and PE to evaluate VNM’s fair value. The stock is worth VND 135,000  per share, with a cash dividend of VND 5,000 per share in the next 12 months, resulting in a 8%  total return based on the current closing price. Therefore, we have an ACCUMULATE on this stock.

CTI_9M update

We recently had a meeting with the management of the company and the  following are the key takeaways:

• CTI posted NPAT-MI in 9M 2019 of VND 56.1 billion (-47% YoY), due to the lack of revenue from key construction projects.
• The company will revise down the profit guidance in 2019 by 29%, due to the delay in some infrastructure projects’ progress. This will result in a decrease in net profit of 19% YoY. Therefore, the stock will trade at a PE trailing 2019 of 15.6x.
• CTI also cancels the equity raising plan of VND 220 billion due to changing in business plan.
• The company will maintain a 10-15% cash dividend payment policy in coming years.

HDB – 9M2019 Business Performance Update

We are noticing a better-than-expected interest income expansion from the parent bank thanks to impressive NIM improvement, accompanied with a recovery in HD Saison who is also trying to catch up with overall credit and earnings growth. However, other incomes are shrinking and have a limited impact on operating income growth. The positive is that both operating expense and provision charges are well under control, supporting earnings growth of 20% YoY. Current CAR (under Basel II) is at 11%, which spares sufficient capital for HDB to maintain strong credit growth in next several years.

HDB is currently trading at VND 29,100, equivalent to a 2020 forward PBR of 1.2x, which is relatively attractive considering the potential growth of around 20%/year in 2019 and 2020. We raise our target price to VND 33,500, equivalent to a potential upside of 15%, thereby keeping an Accumulated rating on the stock.

EVFTA – Export taxes reduction to encourage the EU’s pangasius consumption

The EU-Vietnam Free Trade Agreement (EVFTA), expected to take effect in mid-2020, will encourage the EU’s pangasius consumption  in the upcoming years.

Industrial park_9M updates

2019 has been a good year for the industrial park industry, as leasing demand remained strong. In the North, Bac Ninh and Hai Phong are bright spots for attracting FDI inflows while Dong Nai and Binh Duong play a key roles in the South.
During the first 9 months of 2019, industrial park companies achieved impressive business results, especially developers owning available land bank for lease with large-scale areas.

Update on the brokerage sector: 3Q earning results

Based on the results of 73 brokers for 3Q, PBT reached VND 2,106 bn, -18.9% YoY. While gross profit grew steadily around 15% YoY, operating expenses (*) increased sharply by 52,8% YoY, causing the PBT to decline.

(*): We adjust interest expense into Lending segment’s expenses

QNS – 9M2019’s Business Results Update

QNS is trading at a trailing P/E of 7x, quite attractive compared to the overwhelming market share of its soy milk segment. However, the sale of shares from management and negative movement in its sugar sector caused investors to apply a high discount for the fair value of this stock. We expect that when ATIGA comes into effect and the An Khe factory is put into operation of refined extra (RE) sugar, should help QNS enhance its domestic market share and improve its gross margin. At the same time, the strategy of expanding its soy milk sector to reach US 1 bn in revenue will be a catalyst for the stock price. For 2019, Rong Viet Securities maintains a BUY recommendation for QNS with a target price of VND 40,500/share.

VJC – 3Q 2019 Business Results Update

VJC’s parent company, reflecting core airline business, posted a revenue of VND10.4tn (+17% YoY), PBT of VND1.3tn (+17% YoY), which was mainly driven by financial income. Net profit was flat at VND1.1tn as VJC is subject to higher corporate income tax rate of 20% compared to 10% last year.

VPB – Update on 3Q2019 Business Performance

VPB has reported its consolidated PBT of approximately VND 7.2 Tn (USD 310 Mn, +17.4% YoY), fulfilling 76% of its guidance for the entire year. It mostly came from the recovery of consumer lending as well as the high growth of services income. We estimated that the parent bank’s PBT decreased by 3.6% YoY to VND 3.5 Tn (USD 151 Mn) while that of FC’s PBT was up by more than 52% YoY to VND 3.7 Tn (USD 159 Mn). In 9M 2019, the parent bank contributed 51.5% and FC made up 48.5% of VPB’s total PBT.

VSC - 9M 2019 Business Results Update

VSC’ net profit dropped 33% YoY in 9M 2019. This decrease was attributable to contracted profit margins and one-off items relating to income tax expenses, such as a provision of VND26bn for underpaid tax expenses in previous years of a subsidiary named Green Logistics in 2Q 2019 and other losses of VND 14bn in 1Q 2019.

Update on Brexit

Europe agrees to postpone Brexit to January 31^st 2020, at the latest. The 27 members have allowed for a delay for the exit of Great-Britain from the European Union.

After first hesitating, Europeans finally agreed for a compromise to delay Brexit by three months. French President Macron was the main obstacle to the delay but he finally acquiesced to the pressure from other European leaders. However it remains to be seen if Mr. Johnson will be able to have the British parliament a law approving this delay.

DGW – Q3 2019 Business Result

DGW is having high growths across all the core segments and the ~30% increase in stock price YTD also reflects this. Still, the stock is trading at 12M trailing P/E of 7.5x, which is very low compared to its forecasted EPS growth in this year of around 40%. We believe this comes from investors’ concern about the sustainability of the growth: laptops don’t have much potential left and the smartphone segment is heavily dependent on Xiaomi while consumer goods is still insignificant sizewise and faces fierce competition. Though, the office equipment segment has high potential from the digital transformation trend and Xiaomi’s smartphones are penetrating well into Vietnam. Therefore, we have a positive view on DGW for short-term prospect.