Energy transition: soaring metal prices are an issue

• Transition towards greater use of green energy will push prices of some metals higher.
• Commodity producing countries could benefit from that.
• A substantial expansion of mining for metals could have negative effects on the environment.  

PHR – Resilient long-term outlook and better-than-expected 9M2021 result

• Q3 revenue grew 16% QoQ to VND 522 bn while NPAT-MI surged 90% QoQ to VND 145 bn, supported mostly by revenue from industrial park (IP) leasing, versus no revenue from IP in Q2.
• 9M2021 revenue posted VND 1,253 bn (+44% YoY) and NPAT-MI VND 305 bn (-57% YoY). Revenue growth came from main business segments, including rubber and IP. The plummet in the bottom line was the result of no compensation payment for land use right conversion, versus VND 456 bn compensation payment received in 9M2020 for Nam Tan Uyen 2 Expansion project (NTC3).
• Land use right compensation of VSIP 3 is likely to be received in Q2/2022.
• Given the actual result of the IP segment better than our expectation, we change our forecast for revenue and NPAT-MI of 2021 to VND 2,161 bn (+32% YoY) and VND 487 bn (-55% YoY). The 2022 forecast has also been adjusted down in revenue (VND 2,226 bn, +3%YoY) and NPAT-MI (VND 1,190 bn, +144% YoY) as we think the profit margin of the rubber segment will contract due to higher input prices and Tan Lap 1 IP will be open for leasing later than our old forecast. EPS for 2021 and 2022 are VND 2,937/share and VND 7,173/share, equivalent to P/E forward 2021 and 2022 of 25x and 10x, based on the closing price of Nov 19, 2021, while TTM P/E is 15x.
• We raise our target price for PHR from VND 61,300/share to VND 74,000/share to reflect the better-than-expected result of the IP segment as well as the rubber segment. Together with an expected cash dividend of VND 1,500/share in the next 12 months, this translates to an upside of 2%, equivalent to a NEUTRAL recommendation.
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Do we overlook the thermal group?

• Earnings from the thermal group in 9M2021 were generally low due to difficulties in the industry. Results from most thermal companies experienced a decline in PBT except for POW, PGV and QTP.
• The turnaround story for the thermal group is expected to happen in 2022 based on higher probability of El Nino. Hence, earnings in 2022 are forecasted to grow to normal levels.
• Dividends from thermal companies are attractive.

CTG – Continued pressure in the short-term

• CTG reported resilient income but moderate earnings growth due to major pressure from provisions.
• We revise down earnings estimates for the 2021-2022 period. 2021 NII was revised down by -2% to price in the scale of ongoing supportive interest rate package, while that of 2022 is maintained thanks to higher projected credit growth and lower yield of newly issued bonds. The forecasted 2021-2022 NFIs are shifted down by -4% as we think the bancassurance model is vulnerable to disruptions. The credit cost margin curve is conservatively revised upward to price in the pandemic’s impact, the lag of NPL formation and the uncertainty of the recovery. 2021-2022 PBTs are forecasted at VND 20.5 tn (USD 891 mn, +20% YoY) and VND 23.8 tn (USD 1.0 bn, +16% YoY), down -15% and -13% from our prior projections respectively.
• The volatility in earnings come from the sensitivity to credit cost margin. This might lead to a large discount on valuation multiple depending on the business cycle. The revised 2021-2022 book value per share figures are VND 20,327 and VND 22,645 respectively. We adjust downward the 1-year target price by -1% to VND 39,900/share and maintain a BUY recommendation. This translates to an upside of 24% from the closing price of November 17 2021.

Strong external demand but headwinds remained

• Trade surplus in Oct was the highest since Jan.
• Strong rebound of domestic sector’s exports.
• Strong external demand but headwinds remained.

VNM – 4Q-FY21 NPAT to increase 5% YoY led by revenue growth of 10% YoY

• Although revenue growth is expected to recover well in 2H-FY21, we are still prudent about earning prospects in FY2021-2022 due to the input price hike, while new investment projects still need many years to create significant synergies on results and stock valuation. Therefore, we recommend to ACCUMULATE with a TP of VND 97,000 and total stock return of 14%.
• FY2021 estimated revenue and NPAT to be VND 60,891 Bn (or USD 2.6 Bn, +2.1% YoY) and VND 10,629 Bn (or USD 460 Mn, -4.2% YoY) respectively, completing 98% of revenue and 95% of NPAT target. FY2021 EPS will be VND 4,577, and FY2021 forward PE will be 19x.

Textile and garment industry – Conflicting results in third quarter performance

• Due to COVID-19’s disruptions in 3Q21, many garment companies located in HCMC area were very affected- such as TCM, GMC and GIL. On the other hand, some companies had their own tailwinds, helping earnings grow strongly YoY, such as STK, VGT, MSH and TNG.
• We recommend to ACCUMULATE STK with a target price of VND 65,000/share due to bright recycled yarn prospects and the incorporation of a new factory (Unitex) into our valuation. With regards to MSH, we see the potential to revise up the target price, but we still maintain our view that the strong earnings growth potential in 2022 has largely been priced in.

HAH – Container ship operation segment continues to experience high growth

• Using FCFE method and a target P/E of 9x applied to 2022F EPS, we come at a target price of VND 82,900/share for HAH, implying a total return of 19%, as of Nov 11th, 2021, and recommend "Accumulate" the stock.

PNJ – Takeaways from Q3 2021 AM

PNJ held its online Analyst Meeting yesterday sharing some key points in (1) post-lockdown overall market demand along with sales performance in October; and (2) its strategy to maintain profit margins and market leadership, including long-term store count target by 2025F, and the promotion of digital sales channel; and (3) private placement progress.

BFC - Hard to maintain the gross margin amid the rally in fertilizer prices

• Sales volume reported was 163 tons in 3Q2021, up 10% YoY but down 30% QoQ.
• The 3Q2021 average selling price increased 16% YoY and 16% QoQ to VND11,132 per kg.
• 3Q2021 gross profit margin was 9.7%, down from 12.4% in 1Q2021 and 10.9% in 2Q2021.
• The company accelerated the accumulation of raw material for NPK production amid the surge of input fertilizer prices.
• Revenue and NPATMI are estimated at VND 7,575 bn (USD 336.7 mn) (39,8% YoY) and VND 195 bn (USD 8.7 mn) (46,6% YoY), respectively in 2021.
• We recommend sell for BFC with the target price of VND 28,330 as the business result is not positive in 2022, compared to 2021. However, we believe that the company can pay a higher cash dividend (around VND2,000) on the back of good result in this year.

Global tax agreement. Should Asian countries care?

• It intends first to halt the effort by multinational companies to shift profits into low-tax havens through a new global minimum tax of 15% for multinational companies. 
• It also attempts to address the increasingly digital nature of international commerce by taxing companies, in part, on where they do business instead of where they book profits.
• What is in it for Asia?

VSC - Operating Cost Reduction Has Driven NPAT-MI Growth In 9M2021

• Reduction in outsourcing port operation and cutting operating cost has expanded VSC’s gross margin to 31.6% (+ 672 bps YoY) in 9M2021. An abnormal other income of VND 10 Bn additionally pushed up the growth rate of NPAT-MI in Q3/2021 by 69% YoY to reach VND 109 Bn. As the result, the NPAT-MI in 9M2021 was VND 258 Bn (+ 45.4% YoY). We expect that the NPAT-MI will reach VND 361 Bn in 2021F (+ 50.1% YoY). VSC is trading at P/E 2021F of 12.5x, comparing to a 3Y historical mean of 8.0x.  The fair valuation is still under review.
• Revenue has grown in line with throughput growth in VIP Green and Green Port on the back of stable throughput growth in the Hai Phong area. In 9M2021, port throughput in VIP Green and Green Port increased by 14% YoY, driving the revenue to VND 1,386 Bn, increasing by 12.6% YoY. We expect that total throughput will reach 1,1 Mn TEUs in 2021F (+ 4% YoY) and revenue will reach VND 1,862 Bn (+ 10.3% YoY) in 2021F.
• VIMC Dinh Vu (VSC’s associate since Sep 2021) and two deep-water port projects, namely Cat Hai in Hai Phong and Lien Chieu in Da Nang, are long-term stories, given that VIP Green and Green Port are operating at their designed capacity. However, we believe the earnings from these projects are rather elusive given limited competitive advantages of VIMC Dinh Vu to attract international shipping lines and pending investment planning approval as well as lack of capital for deep-water ports, including Cat Hai (in Hai Phong) and Lien Chieu (in Da Nang).