VHC - Profitability in FY21 to face cost headwinds

• We expect that FY21 revenue will grow by 28% YoY on the back of FY20 low base thanks to the recovery of export volume in major export markets and higher revenue contribution of collagen & gelatin segment. However, high raw materials prices and logistics costs will erode profit.
• FY2021 estimated revenue and NPAT to achieve VND 9,014 Bn (or USD 392 Mn, +28% YoY) and VND 634 Bn (or USD 28 Mn, -9% YoY) respectively, completing 105% revenue target and 91% NPAT target.
• VHC plans to implement large projects to reduce costs and expand product portfolio in the long run. However, those projects are in the building and testing phase and will not bring revenue to VHC in FY21. We are going to reflect the effects of the new projects on our stock valuation in the upcoming reports.
• We maintain a target price of VND 46,200/share. With an expected cash dividend in the next 12 months of VND 1,000/share, the total return will reach 17% based on the closing price of May 21, 2021. We recommend to ACCUMULATE

ACB – Robust income growth supported by CIR improvement

• Better-than-expected income growth led by allocation of upfront fees and NIM expansion.
• Bad debt formation increased significantly in 1Q2021, dragging credit costs. We forecast that NPL will be controlled towards the year end, and credit costs will be slightly lower.
• The negative surprise in provision was offset by CIR improvement as base effect and provision reversal.
• We revise up our a target price by 2.6% to VND 43,500/share. This implies an upside of 16% from the closing price of May 21 2021, and therefore translates to an ACCUMULATE

NVL Q1-2021 AM Note

• 1Q 2021 performance: Skyrocketing revenue and NPAT results with triple digit growth backed by the handover of 709 units mainly in Saigon Royal, Aqua City, Novahills Mui Ne, Novaworld Phan Thiet, Sunrise City View.
• 2021 Outlook: Management expects to achieve revenue of VND 27,678 Bn (+451% YoY) and NPAT of VND 4,106 Bn (+6% YoY) in 2021 from the handover of both HCMC and satellite regions (50/50 revenue contribution). The possible divestment/revaluation is not factored yet on the aforementioned profit plan. After completing a buying back it issued convertible bonds (“CBs”) in 2018 (value at USD 240 Mn), NVL is working with advisors to issue CBs with a value of more than USD 240 Mn (estimated amount at ~USD 300 Mn, finalized amount will be public in June 2021).
• From our point of view, 2021- 2024 should be a strong profit year. The catalysts include (1) Strong pre-sale and handover of three hospitality projects in satellite regions, (2) Less strict legal issues given the effectiveness of several laws/decrees from 2021 to accelerate profit recognition in HCMC projects, (3) Ramp-up progress of nearby public infrastructures to support NVL’s projects price and absorption rate. We have an OBSERVE suggestion on this stock as the price has partly reflected the (1) Solid Q1 2021 pre-sale and delivery performance, (2) Buy back news of its CBs issued in 2018. The next expectation would come from the progress of its new CBs issuance and revenue recognition of HCMC projects along with the sale performance of hospitality projects.

NKG – NPAT to grow strongly due to increasing steel price, accumulated inventory, and strong demand

We expect NKG can earn the highest quarterly NPAT ever in 2Q owing to strong demand overseas, increasing hot-rolled coil (HRC) prices, and its higher inventory. We forecast that the company’s revenue and NPAT will reach VND 6,113 billion and VND 503 billion in 2Q, increasing by 164% YoY and 2,806% YoY respectively. For 2H2021, HRC price’s outlook is better than our expectations as prices for HRC delivered in 3Q are more than USD 1,000 /ton. The company’s NPAT in 3Q will be roughly VND 230 billion, significantly higher compared to previous years. Based on EPS forward in of VND 5,800, we recommend investors to Hold this stock with a target price of roughly VND 37,000/share.

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.