Did Vietnam grabbed investment opportunities from the production shift out of China?

The COVID-19 pandemic has resulted in a slowdown in foreign capital into Vietnam

Despite the country being a beneficiary from the US-China trade war, foreign direct investment (FDI) into Vietnam has been under pressure this year as a result of the COVID-19 pandemic. In the first nine months of 2020, foreign investors committed US$21.2bn to Vietnam, a 19.0% decrease compared to the same period of last year. At the same time, foreign invested-firms disbursed US$13.8bn, a 3.2% decrease over the previous year. These figures contrast to an increase of 6.7% for implemented FDI and 7.2% for registered FDI in 2019.

CTI update

CTI would likely to complete its 2020 profit plan of VND 112 bn, but it will depend on whether they can complete the extended route 319 and interchange of HCMC – Long Thanh – Dau Giay project at the end of 2020. We think that revenue in 2021 could increase sharply as most of their projects could start booking revenue in 2021 such as the extended route 319 and interchange of HCMC – Long Thanh – Dau Giay.

Steel production and consumption in 8M2020 – Visible recovery

The total consumption in the Vietnamese steel market has been lower during the first eight months of 2020 compared to the same period last year, but monthly figures have showed improvement.

SCS - 8M-2020 Update & Q3-2020 Business Result Estimation: The Recovery Process Is Clearer

We noticed positive signals in the first two months of Q3-2020 when SCS's international cargo volume in July and August diminished by 9.3% YoY compared to a decline of 27% YoY in Q2-2020. In August 2020 exclusively, international cargo volume has returned to the level in 2019, with 13.4 thousand tons of cargo, a slight increase of 0.7% YoY. In the first 8 months of FY2020, SCS has completed 69.2% of the full-year volume plan (completing 67.7% of the international volume plan, 73.9% of the domestic volume plan), which is better than our previous expectations

NLG: The handover of Novia and Waterpoint units are expected to drive Q3 results

We met with NLG’s representatives to update on their current projects progress and earnings outlook in 2020 – 2021. Per our observation and Nam Long sharing, the residential real estate market is still active in affordable housing segment given the strong booking of customers in launching events of NLG and other developers while trading activities in secondary market is still tough amid the low liquidity in short term.

From NLG’s projects update, we believe 2021 – 2022 will be strong profit-recorded period. The catalysts include (1) Strong pre-sale and handover by launching of 7 projects, (2) Recovery of residential real estate market in 2021 thanks to Vietnam success in containing Covid-19, (3) NLG’s lank banks in tier-two cities having potential infrastructure development. However, we still concern prolonged project development from lengthened legal process. For 2020, we estimate NLG’s revenue and NPAT- MI will be VND 2,011 Bn (-21% YoY) and VND 811 Bn (-16% YoY), respectively. Therefore, we suggest to ACCUMULATE NLG with one-year target price of VND29,834, implying an upside of 7% versus the closing price on September 21^th 2020.

TCB - Outlook remains strong

We expect TCB to realize solid earnings growth in 2020/2021 as the expansion momentum in both interest and fee income should be able to cover the surge in credit costs. In 1H the bank has accumulated more room for NPL and LLR, in precaution for probable bad debt formation. We think TCB will show a strong resilience to this crisis and be able to recover strongly upon the end of the pandemic.

TCB is currently trading at VND21,300, equivalent to a P/B 2020F of 1.0x. We consider this an attractive P/B versus the bank’s both short-term stable outlook and the strong position to accommodate long-term growth. Upside risk include the ETFs strong buy-in while downside risk is the property sector.

VHC – Pangasius export to the US is recovering quickly

Pangaisus export to the US, the company’s largest market, has recovered in both ASP and volume in  July. We expect the US to be the major growth driver for VHC for the rest of 2020 and 2021. The “new normal state” and the public concerns on unpredicted health problems such as COVID-19 continue to boost growth of value-added pangasius as well as collagen.  We are also more optimistic about the company's ability to stabilize pangasius ASP in 2021 in the face of global economic difficulties. Considering all these factors, we revise up the target price for VHC by 26% from VND 39,700/share to VND 50,000/share. Together with a cash dividend in the next 12 months of VND 1,500/share, the total return is 24%, based on the closing price VND 41,450/share as of Sep 16, 2020. Thus, we have a BUY for this stock.

MWG – DMX Supermini to Further Fuel the Growth of the Consumer Electronics Segment

In June 2020, MWG rolled out the new format for its electronics chain DMX, namely DMX Supermini (DMS) stores, in Tien Giang. This brand-new format is the smallest in terms of store size, and generally located in untapped areas of the province. Initial results from 17 DMS stores in Tien Giang during two months were rather encouraging. Average monthly revenue hit the targeted plan of around VND1.1bn while yielding wider profit margins than existing formats. Following these positive results, MWG is now ramping up the opening of DMS stores nationwide in an effort to quickly consolidate its market share from mom-and-pop consumer electronics retailers in remote areas who are suffering amid the Covid-19. Last week, we joined the opening ceremonies of five DMS stores in Tay Ninh Province organized by the Group. Below is our quick take from store visits, and our view on the stock.

Vietnam’s exports in 8M20: What are the sources of growth?

Widening trade surplus supports the balance of payments

Vietnam’s trade surplus expanded to US$5.0 bn in Aug 2020, a record high vs. a surplus of US$3.5 bn in the same period last year. In Aug 2020, exports continued to grow at 7.1% yoy (vs. 8.2% in July) while imports rose at 1.6% yoy (vs. -3.7% yoy in July). In 8M20, exports rose 2.2% yoy while imports dipped -2.9% yoy, leading to a record trade surplus of US$13.7 bn in 8M20. We believe the record high trade surplus could offset the impact of weaker remittance and FDI inflows on the balance of payments (BOP). According to Fitch Solutions forecast, Vietnam’s current account surplus is set to narrow to 3.7% of GDP in 2020, down from 4.9% in 2019.

PPC - Several factors affecting future profits

PPC is currently a NEUTRAL with a target price of VND 23,100. This represents our neutral and somewhat doubtful view of the business potential for the next 12 months. After two years of brilliant earning growth in 2018 and 2019, PPC is entering a difficult period. The company saw reduced output due to hydrological conditions favoring hydropower plants, and fluctuating input costs due to changes in coal type and changing fuel price method, affecting PPC's medium-term profit outlook.

As mentioned in a recent Analyst Pinboard and update report, we believe that 2020-2021 will be a relatively difficult period for PPC due to many factors: