LTG – Transforming for the long-term

In the first half of the year, the company's results were negatively affected by the COVID-19. We believe that Loc Troi's results will  improve in the second half of the year thanks to favorable weather and continued improvement in working capital management. In addition, better management of account receivables, the commissioning of agricultural services and the renewal of rice production and export will help to improve operational efficiency and create growth drivers in the future. Therefore, we increase our target price from VND 23,400/share to VND 26,400/share. With the expected cash dividend of VND 1,000/share in the next 12 months, the total return is 18.6%. We recommend to ACCUMULATE this stock.

SMC – Foreseeable good performance in 2H2020

We expect SMC’s performance in 3Q2020 will be positive as hot-rolled coil (HRC) prices have surged in the quarter and its high selling volume in the June-August period. In 3Q2020, SMC’s net income is likely to reach VND 45 billion, leading to a net income of VND 90-100 billion in 9M2020. Besides, owing to the high growth rate in the steel pipe segment and the new contract with Samsung, we believe that SMC will maintain a good performance in 4Q2020. Hence, the company will fulfill its net income target of VND 120 billion. We recommend to BUY this stock with a target price of VND 11,300, plus a cash dividend of VND 1,000. The total return is roughly 23%, compared to the closing price on September 9, 2020.

Banking industry: Service income growth has been temporarily hampered, yet the long-term potential remains intact

Payment fees and card fees are expected to maintain growth momentum upon the promotion of non-cash payment as well as banks’ focus on the retail segment and digital transformation. Bancassurance fees should continue to see solid growth upon stronger penetration of insurance and the contribution of banca channel on total insurance premiums (especially life-insurance). Fee income structure can also be diversified with other activities such as bank guarantee, bond services and brokerage.

Overall, we expect that service fee growth amongst our coverage universe would be able to rebound to 25% YoY in 2021 after leveling off at around 12% YoY in 2020.

1H2020 earning results and 2020 plan of contruction rock companies

Obviously, the slowdown in construction has had a significant impact on most of the construction rock enterprises. However, the increase in the average selling price of products compared to the same period last year, coupled with the decrease in COGS, has supported the earnings in 1H2020. With the expectation that public construction activities will be more active in 2H2020, earnings results are expected to improve.

For DHA, its quarries are located in favorable location in the South Vietnam and are ready to benefit from public investment construction and gaining market share from two Nui Nho and Tan Dong Hiep quarries. We think DHA could complete its 2020 profit plan in the third quarter. Meanwhile, the leasing industrial park segment continues to be a lifesaver for KSB in the context that the reserve output of Tan Dong Hiep mine is running out. We also think it will not be difficult for KSB to fulfill its 2020 business targets as the leasing industrial park segment is still performing well.

NNC could fulfill its 2020 plan as the second half of the year on the last five year average contributed over 53% of the year's NPAT. Meanwhile, VLB set a low target of NPAT, down 24% YoY. Therefore, it will not be too difficult to achieve the target as it already completed 70% after 1H2020.

Insurance sector – Non-life insurance sector to outpace life insurance post-pandemic

The Insurance Association of Vietnam (IAV) has just released data showing that the pandemic has influenced life and non-life sectors in a complicated way.

KDC - M&A plans are underway; subsidiaries saw strong growth

We recently had a meeting with KDC. From the meeting, we learned that the group will likely have several M&A activities in the coming future to increase its stakes in existing subsidiaries namely TAC and VOC, besides the AGM-approved acquisition of KDF to make this firm become the wholly-owned subsidiary of KDC. While this is expected to decrease the minority interest and boost the bottom line, the group will keep working on improving its overall operation efficiency through premiumization strategy. Notably, KDC will come back to the confectionary business this year by firstly launching mooncake products under the brand ‘Kingdom’. While we are pending a recommendation on KDC in our next report, below are an overview of the group’s structure, key takeaways from the meeting, and a brief update on Q2-FY20 results.

US economy update

The real 10-year interest rate (inflation adjusted) is currently at around negative 1%. This rate has been negative before during the 1940s in the post WW2 era and in the 1970s (Figure 1).

Decline in real rates sometimes can be a deliberate policy to reduce the debt burden  because the real value of debt falls with rising negative real rates. The policy of negative real rates is always preferred over the bitter pill of allowing companies to go bust.

BMP – Making full use of its core advantages

Now that earnings growth is rare due to the impact of COVID-19, we seek and recommend stocks that are stable in core businesses, financially healthy enough to ensure a goodreturn to shareholders. BMP is one of our top picks. We have recommended to accumulate BMP in May and continue to raise the target price  to VND 52,800 / share in the 2H2020. But the upside is no longer actionable because BMP’s share price has increased 25% since the recommendation date (May 21^st, 2020). However, because of the company's stable core operations and the abundant cash dividend potential, we believe that investors can still consider accumulating BMP when the market price returns to a more attractive level.

IMP: Positive bidding results are foundations for growth in 2H2020

For 2020, we believe that IMP will meet its net income target due to its ETC sales’ strong growth and its attempt to cut SG&A expenses. In 2021, we expect that it will maintain high growth in revenue as its new EU-GMP factory runs commercially. We recommend to ACCUMULATE the shares with a target price of VND 52,500, plus a cash dividend of VND 1,500, a total return of 12%, compared to the closing price on August 28, 2020.

PAC – 1H2020 Update

PAC's business results in 1H2020 are not positive due to the impact of Covid-19 on demand for storage batteries and dry cells. Therefore, the company had to offer discount and promotion to stimulate demand. We believe that the better economic outlook in 2H2020 will help the company improve efficiency, thereby reaching the 2020 plan. In the 2020-2022 period, there will be no sudden growth in results. From 2023 onwards, the new factory in An Phuoc Industrial Park will be the main growth driver.

PVT – 2Q2020 result update

We believe that PVT's profit bottomed out in 1Q2020 and will gradually improve in the coming quarters. Although the profit for the whole year 2020 will be difficult to maintain growth, it will create a low “base” for the company to return to its growth momentum from 2021. In addition, PVT share is being traded at P/E forward 7x, quite cheap compared to its prospect. Therefore, we recommend to BUY the PVT share with the target price of VND13,400, Plus cash dividend of VND400, the total return is 23%, comparing to the closing price on August 26, 2020.

Real estate review: Busy times ahead

The first half of 2020 has passed with the spread out of the Covid-19 epidemic, affecting the overall economy and also changing consumption habits. Real estate businesses were also impacted. The limit on public gatherings has reduced the number of newly launched projects. Many companies also switched to online channels to improve their performance during the quarantine time. The most notable point during this period was that selling prices did not decreased and even increased in some cases. This could be explained by not only the limited supply but also high demand.